## Compound Amount

**Compound Amount**

A = P( 1 + i)^{n},

Where i = and n = mt,

**A** is the future (maturity) value;

**P** is the principal;

** r** is annual interest rate;

**m** is the number of compounding periods per year;

**t** is the number of years;

**n** is the number of compounding periods;

**i** is the interest rate per period.

Example:- Suppose 1000 is deposited for 6 years in an account paying 4.25% per year compounded annually.

**(a) Find the compound amount.**

Solution:- In the formula above, P = 1000, I = .0425, and n = 6(1) = 6.

A = P(1 + i)^{n}

A = 1000(1.0425)^{6}

Using a calculator, we get

A = 1283.68 the compound amount.

** **

**(b) Find the amount of interest earned.**

Soluion:- Subtract the initial deposit from the compound amount.

Amount of interest = 1283.68 – 1000 = 283.68