Compounding Interest
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I want to see in the precess where the 32071.35 came from
The amount A of an investment of P dollars with annual interest rate r compounded
annually for n years is given by the formula
A + P(1 + r)n.
Using the amount formula
A teacher invested $10,000 in a bond fund that should have an average annual return
of 6% per year for the next 20 years. What will be the amount of the investment in
20 years?
Solution
Use n = 20, P = $10,000, and r = 0.06 in the amount formula:
A = P(1 + r)n
A = 10,000(1 + 0.06)20
= 10,000(1.06)20
32,071.35
So the $10,000 investment will amount to $32,071.35 in 20 years.
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Solution Summary
This solution explains how to solve for compound interest.
Solution Preview
There is a problem in the formula given. Compound interest follows this formula:
A = P * (1 + r)^n
The interest is raised to the power of the years. Here ...
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