Use the formula for computing future value using compound interest to determine the value of an account at the end of 7 years if a principal amount of $2,500 is an account at an interest rate of 8% and the interest is compounded daily. (Assume there are 365 days in a year)

Question

phoenixfire · Answer

Do you know the compound interest formula?

anonymous · Answer

A=P(1+r/m)^mt?

phoenixfire · Answer

$$M=P(1+r)^t$$Where M=future amount
P=initial amount
r=interest rate
t=time in years. 
Your question says it's compounded daily so we can modify this equation into:$$M=P(1+{r\over n})^{tn}$$Where the n=number of times interest is applied per year, since it's daily, n=365

phoenixfire · Answer

So now, just plug in all your variables..
P=2500
r=0.08
t=7
n=365

anonymous · Answer

Thank you for the formula. However, am I plugging in the wrong stuff? When I put the equation into my calculator I got the very big number: 913900.92. That seems very off. Am I doing this right? (I put the numbers in exactly how you told me to)

phoenixfire · Answer

You're doing something wrong. 
Make sure you put in brackets. specially on the (  1+(0.08 / 365)  ) ^ (7 * 365)

anonymous · Answer

Oh great!! That helped a lot. Thanks, that really narrowed the number down for me. Now it came out being 4376.41