A(t) = P (1+r/n) ^nt
compound interest formula
This formula is used in compound interest calculations, where:
A(t) = the amount of money in the account after t years
P = the principal amount (initial investment)
r = the annual interest rate (as a decimal)
n = the number of times the interest compounds per year
t = the number of years the money is invested for
To use this formula, you need to know the values of P, r, n, and t, and then plug them into the equation to find the final amount, A(t).
For example, let’s say you invest $10,000 in a savings account that pays 4% interest per year, compounded quarterly (n=4), and you plan to leave the money in the account for 5 years (t=5). Using the formula, we get:
A(t) = P (1+r/n) ^nt
A(5) = $10,000 (1+0.04/4) ^(4*5)
A(5) = $12,167.65
So after 5 years, your $10,000 investment would have grown to $12,167.65, thanks to the power of compounding.
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