Question
If I was given an amount of money for 1 month, and I wanted to compound its interest monthly, which formula would I need to use?
My interest rate is 2.5%. I want to compound monthly (so n=12). But I want to find the amount after compounding interest monthly FOR THAT single month. The amount I'm give (which I think would be P) is 18.60, and is specifically for the month of January.
If I'm using the A=P(1+(r/n))^nt how would I plug my information in?
Like this: A=18.6(1+(.025/12))^(12)(1/12)
Or
Like this: A=18.6(1+(.025/12))^(12)(1)
My interest rate is 2.5%. I want to compound monthly (so n=12). But I want to find the amount after compounding interest monthly FOR THAT single month. The amount I'm give (which I think would be P) is 18.60, and is specifically for the month of January.
If I'm using the A=P(1+(r/n))^nt how would I plug my information in?
Like this: A=18.6(1+(.025/12))^(12)(1/12)
Or
Like this: A=18.6(1+(.025/12))^(12)(1)
Answers
Reiny
don't make it look so complicated
i = .025/12 = .00208333.. (I use my calculator's memory to store such numbers, don't round them off yet)
amount = 18.6(1.00208333...)^1 , for 1 month
= 18.6(1.00208333..
= $ 18.64
Wow, we gained 4 cents interest !
i = .025/12 = .00208333.. (I use my calculator's memory to store such numbers, don't round them off yet)
amount = 18.6(1.00208333...)^1 , for 1 month
= 18.6(1.00208333..
= $ 18.64
Wow, we gained 4 cents interest !
Kaye
THANK YOU SO MUCH! :)
Kaye
Actually, one more quick question. Then if I were going to compound the interest continuously, would it be
A=18.6e^(.025)(1/12)
A=18.6e^(.025)(1/12)
Reiny
yes, it would be 18.6387
since the time is so short, it is no surprise that the two answers are the same
since the time is so short, it is no surprise that the two answers are the same