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Compound Interest problems

Compound Interest example problem

Suppose you make a deposit of $8,000 in the bank account that earns you 5.5% interest. Assuming that you are not withdrawing any funds, find the amount, in dollars, that will be in your bank account 1 year from the date of your initial deposit if

a)  Interest is compounded daily

b)  Interest is compounded monthly

c)  Interest is compounded quarterly

d)  Interest is compounded continuously

 

Solution to this Compound Interest practice problem is given in the video below!


 

TRY IT YOURSELF example question

On January 1, 2021 you borrow a $15,000 loan from the bank with a 7.5% accrued interest. If you do not plan on making any payments during the loan period, find the total balance of your loan, in dollars, that you will owe to the bank on January 1, 2022 for

a)  Daily compounded interest

b)  Weekly compounded interest

c)  Monthly compounded interest

d)  Quarterly compounded interest

e)  Semi-annually compounded interest

f)  Continuously compounded interest


Daily compounded loan balance: $16,168

Weekly compounded loan balance: $16,167

Monthly compounded loan balance: $16,164

Quarterly compounded loan balance: $16,157

Semi-annually compounded loan balance: $16,146

Continuously compounded loan balance: $16,168

 
 


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