Compound Interest Formula

Compound Interest

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COMMON TYPES OF COMPOUND PERIODS

• Compounded annually: one time per year; n = 1

• Compounded semiannually: two times per year; n = 2

• Compounded quarterly: four times per year; n = 4

• Compounded monthly: 12 times per year; n = 12

Multiple Choice

Mark took a loan out for $25,690 to purchase a truck. At an interest rate of 5.2% compounded monthly, how much total will he have paid after 5 years?

• $33,299.42

• $33,672.68

• $34,157.04

• $34,710.88

Multiple Choice

Emily’s parents put $1,500 in her bank account for college tuition. At an interest rate of 8.25% compounded semiannually, what will be the balance after 18 years?

• $6,273.50

• $6,314.08

• $6,385.72

• $6,427.94

Compounded Continuously

Multiple Choice

Damara invests $3500 at 2% compounded continuously for 5 years. How much will she have in her account after 5 years?

• $3868.10

• $3886.10

• $3688.10

• $3286.10

Multiple Choice

Hannah invested $4000. How much money will she have in 15 years if the interest rate of 6% is being compounded continuously?

• 9839.42

• 32412.71

• 9838.41

• 32412.72

Putting It All Together

• Read each problem carefully and answer the question. Be sure to use the correct formula!

Multiple Choice

Mark invests $3,285 in a retirement account with a

fixed annual interest rate of 7% compounded continuously. What will the account balance be after 18 years?

• $12,420.73

• $13,321.33

• $12,671.64

• $11,581.01

Multiple Choice

Olivia would like to buy some new furniture for her home. She decides to buy the furniture on credit with 9.5% interest compounded quarterly. If she spent $7,400, how much total will she have paid after 8 years.

• $15,415.94

• $15,683.28

• $15,927.56

• $16,109.05

Multiple Choice

Chelsea put $7500 into an account paying 5% compounded continuously. How much will she have in 7 years?

• $10,643.01

• $12,294.91

• $9,143.04

• $11,659.53

Multiple Choice

Riley invested $1,000 in savings bonds. If the bonds earn 6.75% interest compounded semi-annually, how much total will Riley earn in 15 years?

• $1,584.62

• $2,651.39

• $2,706.86

• $1,825.10

Multiple Choice

If $1,000 is invested at 16% interest, compounded continuously, for five years, what is the ending balance?

• $1,225,54

• $2,225.54

• $22,255.40

• $225.54

We hope this lesson was helpful in learning about compound interest and interest compound continuously!