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Interest rate formula

Posted on 2016-09-06
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Last Modified: 2016-09-06
Can you please tell me the actual formula?
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Question by:mustish1
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7 Comments
 
LVL 4

Expert Comment

by:AnthonyHamon
ID: 41786972
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Author Comment

by:mustish1
ID: 41786978
A = P(1+r/n)^nt
P=3800
r=5.4
t=8

what is n?
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LVL 4

Expert Comment

by:AnthonyHamon
ID: 41786983
n is the number of times that interest is compounded per year.  So in your case this is 12 because the question states that interest is compounded monthly.
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LVL 14

Assisted Solution

by:Kaffiend
Kaffiend earned 1000 total points
ID: 41786986
You can google for the formula, you know.

The second solution is VERY wrong, btw.
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Author Comment

by:mustish1
ID: 41786990
It looks like different the way it solve above.

A = P(1+r/n)^nt
P=3800
r=5.4
t=8
n=12

A=3800(1+5.4/12)12*8
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LVL 4

Accepted Solution

by:
AnthonyHamon earned 1000 total points
ID: 41787002
t is not 8 - that would be 8 years.  For 8 months it is 8/12 or 0.666667
r is not 5.4 - that would be 540%.  For 5.4% it is 0.054

So you get:
A=3800(1+0.054/12)^(12*0.666667)
A=3800(1.0045)^(8)
A=3800(1.036572)
A=3938.83
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Author Closing Comment

by:mustish1
ID: 41787007
Thank You.
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