Compound Interest Calculations

Pre-Calculus · Axiom Academy

EXAMPLE Compound Interest Calculations Working a savings problem step by step with . Sarah invests 8,000 in a savings account that earns 4.5% annual interest , compounded quarterly . How much will she have after 6 years ? Nice work. You ran a real investment through the compound interest formula from start to finish. Match the period: the rate per period is r/n and the exponent is — here 0.045/4 = 0.01125 over quarters. One careful evaluation: , then multiply by the principal. Result: 8,000 grows to 10,463.93 in 6 years — about 2,463.93 of interest. More frequent compounding (monthly, daily, or continuous) would push this final balance a little higher.

This is the written version of the interactive lesson above. See the full Pre-Calculus course.