Practice Compound Interest in Math
Use these practice problems to test your method after reviewing the concept explanation and worked examples.
Quick Recap
Interest calculated on both the initial principal and the accumulated interest from previous periods. The formula A = P\left(1 + \frac{r}{n}\right)^{nt} gives the amount after t years, and A = Pe^{rt} gives the continuously compounded amount.
Simple interest pays you only on your original deposit. Compound interest pays you interest on your interest—your money earns money on the money it already earned. The more frequently you compound, the more you earn, because each tiny interest payment starts earning its own interest sooner. The ultimate limit of compounding more and more frequently is continuous compounding: A = Pe^{rt}.
Example 1
easyYou invest \5{,}000 at 6\%$ annual interest compounded quarterly. Find the amount after 3 years.
Example 2
mediumHow long does it take for an investment to double at 8\% annual interest compounded monthly?
Example 3
mediumFind the amount when \2{,}000 is invested at 5\%$ compounded continuously for 4 years.
Example 4
easyYou deposit \1{,}200 in a savings account at 4\%$ compounded annually. What is the balance after 5 years?
Example 5
hardWhat annual interest rate, compounded monthly, is needed to grow \3{,}000 to \4{,}500 in 6 years?