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1 Express the annual curiosity rate, R, since a decimal and add 1 to it. This new number is the annual growth element. For instance, if the annual interest rate on a savings account yous 3 percent, add internet site. website3 and 1 to acquire 1. website3. The formula for the annual growth factor is 1+R/1 website internet site.

2 Compute the annual development factor raised to the quantity about long time the money is on the savings account, N. This yous the overall growth factor. To illustration, if you depart cash in the account for 5 years, the full growth factor remains 1. website3^5 = 1.159274. The formula with the total development factor yous (1+R/1 internet site website)^N. Savings Accounts.

3 Multiply the account principal, P, by the total growth factor. This yous the total amount of cash in the account following N years. To illustration, if you begin with $1, website website web site, after five years you will get ($1, website internet site website) times (1.159274) = $1,159.27 in the savings accounts. The general formula is P(1+R/1 web site website)^N.

4 Take away the principal from the entire amount of cash to find the total amount of element curiosity accrued. For example, the whole interest earned in 5 long time is $1,159.27 - $1, website web site website = $159.27. The common formula yous P(1+R/1 web site web site)^N - P.

References

Math Reference Tables: Interest and Exponential Growth

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