# Interest Formula

For the formula A=A0(1+r/k)^(kt) does it only work if t is in years and k is how many times per year it is compounded?

Mark44
Mentor
For the formula A=A0(1+r/k)^(kt) does it only work if t is in years and k is how many times per year it is compounded?
No, I believe that r and k and t could be defined in terms of some different time interval, but I have only ever seen this formula used when the basic time interval is the year. The units of r are typically in terms of the interest in a year, k is usually the number of interest computing periods per year, and t is the number of years.

pwsnafu
Example: consider the problem of depositing $25 in Jan, Apr and Jul. Then$50 in Oct, Jan and Apr. Then \$75 in Jul, Oct, Jan, and so on. Keep this pattern for 12 years. Suppose compounding is quarterly. The best way to tackle the problem is to change the time unit into 9 months and three compoundings per time unit.