[MOVED] Banking formula for calculating the amount of money

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misstina

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Sep 16, 2006
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The formula for calculating the amount of money returned for an initial deposit money into a bank account or CD (Certificate of Deposit) is given by

A=P(R+ r/n)nt

A is the amount of returned.
P is the principal amount initially deposited.
r is the annual interest rate (expressed as a decimal).
n is the compound period.
t is the number of years.

Suppose you deposit $10,000 for 2 years at a rate of 10%.
Calculate the return (A) if the bank compounds annually (n = 1). Round your answer to the hundredth's place.

Can someone explain to me how to do these types of equations. Especially when the compound rate varies from quarterly or daily or monthly.

Thank you
misstina
 
Re: Banking formula

misstina said:
The formula for calculating the amount of money returned for an initial deposit money into a bank account or CD (Certificate of Deposit) is given by

A=P(R+ r/n)nt

A is the amount of returned.
P is the principal amount initially deposited.
r is the annual interest rate (expressed as a decimal).
n is the compound period.
t is the number of years.

Suppose you deposit $10,000 for 2 years at a rate of 10%.
Calculate the return (A) if the bank compounds annually (n = 1). Round your answer to the hundredth's place.

Can someone explain to me how to do these types of equations. Especially when the compound rate varies from quarterly or daily or monthly.

Thank you
misstina
Click to expand...
What are you missing? In this case, you just plug it in. Perhaps it is the bad formula that is puzzling you? It should say:

\(\displaystyle \L\,A=P(1+ \frac{r}{n})^{n*t}\)

Plugging (substituting) gives

\(\displaystyle \L\,A=10000(1+ \frac{0.10}{1})^{1*2}\)

\(\displaystyle \L\,A=10000(1.1)^{2}\)

\(\displaystyle \L\,A=10000(1.21)\)

\(\displaystyle \L\,A=12100\)
 
I didn't like that your 'nt' didn't look like an exponent. You can use this guy '^' to mean exponentiation.

x-squared would be x^2, for example.

Good deal. Got anything even more fun? :wink:
 
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