# Help with Compound Interest Homework Problem

• oceanflavored

#### oceanflavored

i have five problems on this on my econ test tomorrow. PLEASE HELP! I've looked in my book and can't find anything! thank you :)

## Homework Statement

Calculate compound interest:
principal: 65,000
rate: 5.25%
time: 1.5 years

it doesn't say how long it's going to be compounded

## Homework Equations

i found this one on wikipedia http://en.wikipedia.org/wiki/Compound_interest :
A = P(1 + (r/n)) ^ (nt)
where,
P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t

and then i found this one...

A = P(1 + r)^t
where,
r = annual interest rate
t = number of years
P = principal amount
A = amount after time t

## The Attempt at a Solution

i REALLY tried to calculate this, but i can't get the answer which is supposed to be \$5185.36

calculation is
65000*[(1+.0525)^1.5-1]

It is written confusingly
we have
A = P(1 + (r/n)) ^ (nt)
where,
P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t
A = P(1 + (r/n)) ^ (nt)
I = P[(1 + (r/n)) ^ (nt)-1]
I is the interest and
A=I+P
where,
P = 65000
r = .0525
n = 1
t = 1.5
A = 65000*[(1+.0525)^1.5]
I = 65000*[(1+.0525)^1.5-1]