Question

A deposit of $5000 earns 8% annual interest. Find the amount at the end of 6 years and the amount of interest earned during the 6 years if the interest is compounded?

Answer 1

First, the Compounded Interest Formula:
\[A = P (1+\frac{ r }{ n })^{nt}\]

P = principal amount (the initial amount you borrow or deposit)
r = annual rate of interest (as a decimal)
t = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including interest.
n = number of times the interest is compounded per year

Plug in the values given for P, r, t, and n to find A.

Now that you know the amount after interest, and you were given the original amount, solve for the amount of interest accumulated.