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Formulas for interest Interest

  1. Oct 9, 2006 #1
    Today I was watching my sister do her Financial homework and I tryed to do one of them problems it said something about haveing 5000 bucks at 9% interest for 6 years and you had to find how much you would have.

    And so I tryed to use the compound interest formula P=A(1+(r/n)^rt but we both got totaly different anwers. She did it on a standar issued financial caculator.

    So is that the formula for compound interest? P=A(1+(r/n)^rt. And is this how you plug it in? P=5,000(1+(.09/6)^(.09*6)

    Also what are other interest raletaed equations and state what goes in the variables.

    All the other ones that I know are:

    Compound Interest: P=A(1+(r/n)^rt

    Compound Interest Continusly: P=e^rt

    Rule of 72

    Rule of 82

    Simple Interest: You dont really need a formula for this one, all that happens is that your you only earn interest on your original amound earns interst.
  2. jcsd
  3. Oct 10, 2006 #2
    The formula for compound interest is: [tex] P(1+\frac{r}{n})^{nt} [/tex] not [tex] P(1+\frac{r}{n})^{rt} [/tex] So:

    [tex] A = 5000(1+\frac{0.09}{1})^{6} = 8385.5 [/tex], assuming that it is returned once per year.
    Last edited: Oct 10, 2006
  4. Oct 13, 2006 #3
    I never remember the compound interest formula. I just express a 9% increase as 1.09. Then the answer just becomes [tex]5000(1.09^6)[/tex]

    I just find this method easier to remember tbh..although it's basically the same thing.
    Last edited: Oct 13, 2006
  5. Oct 13, 2006 #4


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    That's assuming it is compounded annually. Surely the problem said something more than just "5000 bucks at 9% interest for 6 years". Didn't it say something like "simple interest" or "compounded monthly", "compounded annually", etc.?
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