How to use compound interest to find the final value

The video tutorial explains how to calculate the final value of an investment using the compound interest formula. It breaks down the formula into its components, including principal, interest rate, compounding frequency, and time. The tutorial demonstrates how to apply the formula with specific values, emphasizing the importance of order of operations and accuracy in calculations to avoid errors. The final calculation shows the significant impact of compound interest over time.

What is the principal amount invested in the compound interest problem?

• $1000

• $2000

• $500

• $1500

How is the annual interest rate of 6% expressed in decimal form?

• 0.006

• 6.0

• 0.06

• 0.6

How many times per year is the interest compounded in this problem?

• 6

• 4

• 24

• 12

What is the exponent in the compound interest formula when the interest is compounded monthly for 40 years?

• 6

• 40

• 480

• 12

What is the final amount after 40 years of compounding monthly at a 6% annual interest rate?

• $10,957.45

• $10,000

• $11,000

• $9,500