The compound interest formula for compounding more than once a year is:
A = P(1 + r/n)^(nt)
Where:
A = the accumulated balance after the stated period
P = the principal (initial deposit)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case, the principal (P) is $3000, the annual interest rate (r) is 6% which is equal to 0.06, the number of times interest is compounded per year (n) is 12 (monthly compounding), and the number of years (t) is 6.
We can plug these values into the formula:
A = 3000(1 + 0.06/12)^(12*6)
A = 3000(1 + 0.005)^72
A = 3000(1.005)^72
A = 3000(1.432364654)
A ≈ $4,297.09
Therefore, the accumulated balance after 6 years with monthly compounding is approximately $4,297.09.
Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period.
$3000 deposit at an APR if 6% with monthly compounding for 6 years
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