Question 35041: Compound Interest. I know the formula and have my teacher's answer to this quesion but
cannot get from one to the other. Frustration has reached its peak!
Here's the problem with the answer:
If you invest $500 at an annual rate of 10% compounded quarterly for 20 years, you will earn $3,104.78 in interest and have a total of $3,604.78.
The formula (as I understand it to be): A=p(1+r/n)(nt) or A=500(1+.1/4)4(20) or A=500(1.025)80 or
(please stick with what I'm thinking and tell me what is wrong...) or A=500 times 1.025 times 80
or (after I multiply those three figures together) A=410,000 - obviously not the $3,104.78 in
interest as figured by my teacher. I'm not a total dummy, but this I cannot figure out. Any help would be GREATLY appreciated! Thank you in advance (and again later).
Answer by hydromojo(20)   (Show Source):
You can put this solution on YOUR website! Hello,
Seems you are right in your step-by-step methodology. Just one small problem.
here is the formula for the total amount at the end of the period, interest compounded
so,
solve, and you get Amount = $3,604.78 :-))
Looks like the last (nt) term you had was multiplied, not raised to the power. That was the problem
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