Explore BrainMass

Compound interest

The formula for the amount due on a loan is A= P (1+(r/m))^(mt)

Now in the question the time in years (t) is 6 years 9 months.
P= $17500 r=0.085

How do I write the time(t) in the equation?

Also, what if the time was 4 years 3 months, how would I write that for the time in years (t)?

Also, what does semiannually, monthly and continuously mean?

Solution Preview

The choice of time (in year or in Month) depends on

the nature of compound periods.
If the amount P is compounded monthly, we should write

number of periods n = 6 year and 9 months into t = ...

Solution Summary

This explains how to use the compound interest equation for a loan.