The formula for compound interest is
[tex] A = P(1 + \frac{r}{n}) ^{nt} [/tex]
Where:
A = the future value of the investment/loan, including interest - the money you want at the end
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for
In the problem $5000 is our principal -- P, r is 6% = 0.06, n = 3 and t = 6. We place them in the formula.
[tex] A = 5000(1 + \frac{0.06}{3}) ^{(3)(6)} [/tex]
= 5000( 1 + .02)¹⁸
= 5000(1.02)¹⁸
= 5000(1.42824)
= 7141.23 (rounded to the nearest cent)
So after 6 years Moxie has $7141.23.
