Formulas for interest Interest

1. Oct 9, 2006

cracker

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. Oct 10, 2006

The formula for compound interest is: $$P(1+\frac{r}{n})^{nt}$$ not $$P(1+\frac{r}{n})^{rt}$$ So:

$$A = 5000(1+\frac{0.09}{1})^{6} = 8385.5$$, assuming that it is returned once per year.

Last edited: Oct 10, 2006
3. Oct 13, 2006

mk_gm1

I never remember the compound interest formula. I just express a 9% increase as 1.09. Then the answer just becomes $$5000(1.09^6)$$

I just find this method easier to remember tbh..although it's basically the same thing.

Last edited: Oct 13, 2006
4. Oct 13, 2006

HallsofIvy

Staff Emeritus
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.?