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Subject:  Finite Math

Compound interest on $1000 at 5% for 10 years

Find the future value with monthly compounding.

Answer A = 1647.01, I = 647.01

Solution

  1. Principal P = 1000.00
  2. Rate r = 5% = 0.05 per year
  3. Time t = 10 years
  4. Compoundings per year n = 12
  5. Formula A = P · (1 + r/n)^(n·t)
  6. Final amount A = 1000.00 · (1 + 0.05/12)^(12·10) = 1647.01
  7. Interest earned I = A − P = 647.01

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