The amount compounded at a rate of 8% over a period of 6 years is $8,551.56
<h3>Compound Interest</h3>
The compound interest is the interest-based on the initial principal amount and the interest collected over the period of time. The formula for compound interest can be derived from the formula for simple interest. The formula for simple interest is the product of the principal, time period, and rate of interest (SI = ptr/100). Before looking into to derivation of the formula for compound interest, let us understand the basic difference between simple interest, compound interest computation. The principal remains constant over a period of time, for simple internet computation, but for compound interest computation the interest is added to the principal, for compound interest computation. The compound interest formula is given below:
A = P(1 + r/n)^nt
- Compound Interest
- P = principal
- r = rate
- n = number of times compounded
- t = time
Applying the formula of compound interest here;
A = 5300(1 + 0.08/12)^12 * 6
A = $8,551.56
Learn more on compound interest here;
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