Formula for Compound Interest:
Amount = Principle[tex]( 1+\frac{r}{n} )^{nt}[/tex]
Principle = Initial amount
r = interest rate (as a decimal)
n = how many times compounded per year
t = time ( as years)
What we know:
Principle = $1600
r = 4.6% converted to decimal = 0.046
n = compounded monthly so 12 times a year = 12
t = 4
Plug in the known values to the formula to find what the Amount is
Amount = 1600[tex](1+\frac{0.046}{12}) ^{12*4}[/tex]
Solve
= 1600(1.0038333...)^48
The dots are because it is either a repeating or non repeating decimal and I didn't round till the end.
Do the exponents first because PEMDAS
= 1600(1.201593...)
Amount = $1922.55
Rounded to the nearest cent.
Avoid common errors by-
converting r to a decimal and leaving it a %
making sure that t is in years
making sure that n is the number of time compounded every year
