$2000 principal earning 3% compunded after 6 years?
how do i solve this? i don't need answers i just don't know what the equation is.
after a year x = x + .03x = 1.03 x
every year multiply by 1.03
2000 (1.03)^6
To solve this problem, you need to use the formula for compound interest. The formula is:
A = P (1 + r/n)^(nt)
where:
A = the future value of the investment/loan, including interest
P = the principal amount (the initial investment/loan)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, you have a principal amount of $2000, an interest rate of 3%, and a time period of 6 years.
Step 1: Convert the interest rate to decimal form:
3% = 0.03
Step 2: Substitute the given values into the formula:
A = $2000 (1 + 0.03/1)^(1*6)
Step 3: Simplify the equation inside the parentheses:
A = $2000 (1.03)^6
Step 4: Evaluate the expression:
A ≈ $2000 (1.191016)
Step 5: Calculate the final value:
A ≈ $2,382.03
Therefore, after 6 years, a $2000 principal amount earning 3% compounded interest will grow to approximately $2,382.03.