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All,
I don't understand why this equation isn't a simple interest equation I=PRT, and if it is a compounded interest formula, why is it not I=p(1+r/n)^nt? I searched the board and found one related post but still do not understand, I'd appreciate any help (I have a feeling this is simple and I am missing something obvious here...) Thanks in advance - J
I don't understand why this equation isn't a simple interest equation I=PRT, and if it is a compounded interest formula, why is it not I=p(1+r/n)^nt? I searched the board and found one related post but still do not understand, I'd appreciate any help (I have a feeling this is simple and I am missing something obvious here...) Thanks in advance - J
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11 Aug 2008, 17:04
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I'm not sure why you're using 1+r/n. That isn't correct.
When you have compounding interest, you know you're going to have exponents. You're close in that forumula you used, but it is simpler than what you have.
V = Value after n years
n = number of years interest earned.
r = rate of interest.
V = p(1+r)^n
$1,000(1+0.056)^3
$1,000(1.056)^3
When you have compounding interest, you know you're going to have exponents. You're close in that forumula you used, but it is simpler than what you have.
V = Value after n years
n = number of years interest earned.
r = rate of interest.
V = p(1+r)^n
$1,000(1+0.056)^3
$1,000(1.056)^3
jlola21
11 Aug 2008, 18:42
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Both the formulae,
are correct
Refer this for details
https://en.wikipedia.org/wiki/Compound_interest
given that n=1 , both should yeild
$1,000(1.056)^3
jallenmorris
jlola21
are correct
Refer this for details
https://en.wikipedia.org/wiki/Compound_interest
given that n=1 , both should yeild
$1,000(1.056)^3
