Explain why the amount of money in the account at the end of t years is given by the formula:
1 answer:
Answer:
Step-by-step explanation:
The initial amount invested is P0
Say it is compounded periodically either quarterly or monthly or semi annually with interest r%
If for a period interest is r%
Then after first period principal = principal+simple interest
=
where n is the no of times in a year it is compounded. n = 4 if quarterly, 12 if annually, etc
At the end of II period we have
Principal =
So for interest again the process is repeated
Thus we repeat this nt times which result in power with nt
Hence the formula
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Like :
Divide ( simplify ) by 2
Or multiply by any number,
From the example, 2 / 3 and 8 / 12 are equivalent ratios to 4 / 6