Find the total number of compounding periods and interest rate per period.
Princial: $700, time period :8yrs , nomial rate: 1.5%, interest compounding :monthly, copounding amount________, compound interest_______
* i need to figure outhe compounding amount & compound interest
Not sure what "compounding amount" means.
If you mean the final amount after adding the interest, just apply the usual formula, which you surely have.
A = 700(1+.015/12)^(12*8) = 789.19
To find just the interest, subtract the original $700, leaving just $89.19
To find the compounding amount and compound interest, you need to know the total number of compounding periods and the interest rate per period.
Given information:
Principal: $700
Time period: 8 years
Nominal rate: 1.5%
Interest compounding: monthly
To calculate the total number of compounding periods, you need to multiply the number of years by the number of compounding periods per year. Since the interest is compounded monthly, there are 12 compounding periods in one year.
Total number of compounding periods = Time period * Number of compounding periods per year
Total number of compounding periods = 8 * 12 = 96 periods
To calculate the interest rate per period, you need to divide the nominal rate by the number of compounding periods per year. In this case, since the interest is compounded monthly, the number of compounding periods per year is 12.
Interest rate per period = Nominal rate / Number of compounding periods per year
Interest rate per period = 1.5% / 12 = 0.125% or 0.00125 as a decimal
Now, using the compound interest formula, we can calculate both the compounding amount and compound interest:
Compounding Amount = Principal * (1 + Interest rate per period)^(Total number of compounding periods)
Compound Interest = Compounding Amount - Principal
Compounding Amount = $700 * (1 + 0.00125)^96
Compound Interest = Compounding Amount - $700
To calculate the compounding amount and compound interest, substitute the values into the equations and compute the results.