# Compounded Interest

## Bios

Jordan: I like math, but it gives a lot of headaches. I enjoy basketball, breaking ankles since '98. I also enjoy hunting and fishing and other outdoor activities. I am a senior and I'm looking forward to graduation.

Blayne: Coolest kid on the block.

Saleena:

## How-To

You take the formula A=P(1+r/n)^nt and plug in the numbers accordingly.

Example:

Annual compound interest formula. If an amount of \$5,000 is deposited into a savings account at an annual interest rate of 5%, compounded monthly, the value of the investment after 10 years can be calculated as follows... P = 5000. r = 5/100 = 0.05
Introduction to compound interest

## Notes

Compound interest is interest added to the principal of a deposit or loan so that the added interest also earns interest from then on. This addition of interest to the principal is called compounding.

You use the formula A=P(1+r/n)^nt and plug in the numbers.

A= The final amount

P= Original investment

r= interest rate

t= time in years of investment

n= number of times it is compunded

## Compounded Continuously

The process of earning interest on top of interest. The interest is earned constantly, and immediately begins earning interest on itself.

An amount of \$2,340.00 is deposited in a bank paying an annual interest rate of 3.1%, compounded continuously. Find the balance after 3 years. Solution. Use the continuous compound interest formula, A = Pe rt, with P = 2340, r = 3.1/100 = 0.031, t = 3.

Formula for continuously compounding interest
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