Example 1: If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how
much money will be in the account after 5 years?
Plug in the giving information, P = 4000, r = 0.06, n = 4,
and t = 5.
Use the order or operations to simplify the problem. If the
problem has decimals, keep as many decimals as possible
until the final step.
FV = 5387.42 Round your final answer to two decimals places.
After 5 years there will be $5387.42 in the account.
Example 1: If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how
much money will be in the account after 5 years?
Plug in the giving information, P = 4000, r = 0.06, n = 4,
and t = 5.
Use the order or operations to simplify the problem. If the
problem has decimals, keep as many decimals as possible
until the final step.
FV = 5387.42 Round your final answer to two decimals places.
After 5 years there will be $5387.42 in the account.Example 2: If you deposit $6500 into an account paying 8% annual interest compounded monthly, how
much money will be in the account after 7 years?
Plug in the giving information, P = 6500, r = 0.08, n = 12,
and t = 7.
Use the order or operations to simplify the problem. If the
problem has decimals, keep as many decimals as possible
until the final step.
FV = 11358.24 Round your final answer to two decimals places.
After 7 years there will be $11358.24 in the account.
Example 3: How much money would you need to deposit today at 9% annual interest compounded monthly
to have $12000 in the account after 6 years?
Plug in the giving information, FV = 12000, r = 0.09, n =
12, and t = 6.
Use the order or operations to simplify the problem. If the
problem has decimals, keep as many decimals as possible
until the final step.
P = 7007.08 Divide and round your final answer to two decimals
places.
You would need to deposit $7007.08 to have $12000 in 6 years.
In the last 3 examples we solved for either FV or P and when solving for FV or P is mostly a calculator
exercise. Be careful not to try and type too much into the calculator in one step and let the calculator
store as many decimals as possible. Do not round off too soon because your answer may be slightly off
and when dealing with money people want every cent they deserve.
In the next 3 examples we will be solving for time, t. When solving for time, we will need to solve
exponential equations with different bases. Remember that to solve exponential equations with
different bases we will need to take the common logarithm or natural logarithm of each side. Taking
the logarithm of each side will allow us to use Property 5 and rewrite the problem as a multiplication
problem. Once the problem is rewritten as a multiplication problem we should be able to solve the
problem.
12(7) 0.08 FV 6500 1
12
Ê ˆ = + Á ˜ Ë ¯
84 FV 6500(1.00666666)
FV 6500(1.747422051)
=
=
12(6) 0.09
12000 P 1
12
Ê ˆ = + Á ˜ Ë ¯
72 12000 P(1.0075)
12000 P(1.712552707)
Step-by-step explanation:
