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#1
04-30-2008, 07:57 PM
 imbadatmath Junior Member Join Date: Apr 2008 Posts: 1
Compound interest problem

2000 dollars is invested at a rate of 12 percent per year. What is the principle after 5 years if interest is compund quarterly?
#2
06-30-2008, 08:36 AM
 redarmy Junior Member Join Date: Jun 2008 Location: New Zealand Posts: 1

Suppose the interest rate quarterly is q, The principal is P, then the interest earned (I) after n years is:

I = P(1 + q)^(4n)

In this case, the interest rate quarterly is (12%)/4 = 3%

So the interest earned after n years is
I = 2,000(1 + 3%)^20 = 3,612
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