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Algebra I: Compound interest
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Compound interest

Compound interest is interest calculated on the principal amount plus the accumulated interest of prior periods.

Compound interest can be calculated on daily, monthly, quarterly, half-yearly or yearly basis. Generally more times an amount is compounded, more money can be made.

Let
P = Principal (the initial amount you borrow or deposit)
r = Annual rate of interest(as a decimal) 
n = Number of times the interest is compounded per year
t = Number of years the amount is deposited or borrowed for
A = Amount accumulated after n years, including interest.

Then,
              A = P(1 + r/n)nt

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Example: An amount of $2,400 is borrowed from bank at an annual interest rate of 4.3%, compounded quarterly. Find the amount to be deposited after 6 years.
Solution: Given,
P = $2,400
r = 4.3% = 4.3/100 = 0.043
n = 4
t = 6
A
= P(1 + r/n)nt
= 2400(1 + 0.043/4)4(6)
= 2400(4.043/4)24
= $3102.14(approx.)
The amount to be deposited after 6 years is $3102.14 approximately.

 
   
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