posted by mike... .
Using the following values, calculate the amount accumulated (future value):
Initial Principal = $9000
Interest Rate = 8%
Number of years = 9
The formula for compound interest is:
Final amount or future value,
A = PR^n
P = principal
R = rate of interest per period, for example, 8% p.a. is 2/3% per month.
R is expressed as 1+rate, so for monthly compounding, R for 8% is 1+8/1200=1.00666667
n = number of periods, month in this case.
This is what i came up with..Dont know if im right.please let me know.
FV= 9000 (1+0.08)9
= 1.08^9 = 1.9990
= 8000 (1.9990) = 17991.00
Future Value = $17, 991.00
What you've done is correct if it is compounded annually.
The question specifies compounded monthly.
What you need to do is to divide the interest into monthly interest rate, namely
and compound it over n=9*12=108 periods.
It will increase the final amount by about $450.
Got it..Thank you!