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math

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Please help I know to figure out simple interest but what is the best way to figure out compound interest example 8,000 invested for one year at 6 % compounded quarterly (with the answer rounded to the nearest dollar

  • math -

    For starters, if the 6% is compounded quarterly, that is 6/4 or 1.5 % each three month period. (Percent interest is generally given as if for a year)

    That means that every three months you multiply what you have in the bank by 1.015.

    In a year, you compound four times, so you multiply by 1.015 four times or

    $8,000 * 1.015*1.015*1.015*1.015
    or of course
    $8,000*1.015^4
    or
    $8,000 * 1.06136 (a little better than 6% simple)
    or
    $8490.91 which is to the nearest dollar $8491

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