Math

compound and interest Using the below values please calculate the amount accumulated (future value) *Initial principal=$2000 *Interest Rate=9% *Number of years 7 *Monthly compounding

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  1. For monthly compounding (as opposed to annual), we need to calculate two things:
    1. the monthly compounding interest:
    annual interest/12=9%/12=0.75%=0.0075
    2. the number of periods to cover 7 years
    = 7*12 =84 (months)

    The future value
    = Principal * (1+interest)^periods
    = 2000*1.0075^84
    = $3746.40

    (compare to simple interest
    2000*(1+0.09*7)= $3260 < $3746, OK)

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