Compound interest with different compounding periods
Find the future value of an investment using A = P(1 + i)^n with a stated compounding frequency. Unlimited questions, five difficulty levels, and a full worked solution every time — free.
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Sam invests $1000.00 in a GIC that pays 6% per year, compounded annually. How much is it worth after 2 years?
A = P(1 + i)n
Answer: 1123.6
See one solved, step by step
Sam invests $1500.00 in a GIC that pays 5% per year, compounded annually. How much is it worth after 2 years?
A = P(1 + i)n
📘 Worked solution
1i = 5% / 1 = 5% per period"Compounded annually" means the annual rate is split across 1 period a year.
2n = 1 · 2 = 2 periodsTotal number of compounding periods = periods per year times years.
3A = 1500(1 + 0.05)2 ~ 1653.75Apply the compound interest formula with the per-period rate and total number of periods. Keep several decimal places on the per-period rate here (that's why it's ~, not =) — rounding it too early would throw off the final cents over 2 periods.
4Worth $1653.75Round money to the nearest cent.
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