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Compound interest

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Compound interest

by rupsk » Sat Jul 09, 2011 6:59 am
Donald plans to invest x dollars in a savings account that pays interest at an annual rate of 8% compounded quarterly. Approximately what amount is the minimum that Donald will need to invest to earn over $100 in interest within 6 months?

$1500
$1750
$2000
$2500
$3000


i have used below formula
A = P(1 + r/n)nt
where A=100,t=0.5, r=8%, n=4

Is it correct?
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by Frankenstein » Sat Jul 09, 2011 8:44 am
No...A = P(1 + r/n)nt - P
P(1+0.02)^2 = P(1.0404) i.e. interest will be 4.04% of P.
You can see from the options, 2500*4% = 100
So, D
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by rupsk » Sat Jul 09, 2011 11:54 am
thanks a lot
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