If $5000 is deposited at 6% compounded annually, what will be the total on deposit at the end of 6 years. How?

Question

If $5000 is deposited at 6% compounded annually, what will be the total on deposit at the end of 6 years.how much is the interest?

what is the equation or the formula to this problem. And can you please show me the solution. thanks

Answer 1

Hi,

The formula for compound interest is A = P(1 + r/n)^(n*t).
In this formula "A" is the amount of money at the end, "P" is the principal or starting amount of money, and "r" is the percentage rate as a decimal number. "n" is the number of times interest is paid each year and "t" is the number of years interest is collected.

In this problem:
P = 5000
r = .06 (for 6%)
n = 1 for annual payment
t = 6 for 6 years

The formula becomes:
A = P(1 + r/n)^(n*t)
A = 5000(1 + .06/1)^(1*6)
A = 5000(1.06)^(6)
A = $7,092.60

This is the total amount in the account after 6 years. Since $5,000 was originally invested, the interest is found by:

$7,092.60 - $5,000 = $2,092.60 interest

I hope this helps!! :-)

Answer 2

Principle amount is $5000

Interest rate is 6%

It is compound interest and it is compounded annually. This means, every year the interest is computed and the interest is added to the principle to get the new principle. In the next year interest is calculated based on the new principle.

Initial principle = $ 5000

End of 1st year
Interest at 6% ($5000 X 6/100) = $ 300
New Principle ($5000+$300) = $ 5300

End of 2nd year
Interest at 6% ($5300 X 6/100) = $ 318
New Principle ($5300+$318) = $ 5618

End of 3rd year
Interest at 6% ($5618 X 6/100) = $ 337.08
New Principle ($5618+$337.08) = $ 5955.08

End of 4th year
Interest at 6% ($5955.08 X 6/100) = $ 357.30
New Principle ($5955.08+$357.30) = $ 6312.38

End of 5th year
Interest at 6% ($6312.38 X 6/100) = $ 378.74
New Principle ($6312.38 +$378.74) = $ 6691.12

End of 6th year
Interest at 6% ($6691.12 X 6/100) = $ 401.47
New Principle ($6691.12 +$401.47) = $ 7092.59

Hence amount at the end of 6 years is = $ 7092.59
Interest earned is = $ 2092.59

Compound interest is calculated with the formula
P X ( (1+r/100) to the power of n )
(P = Principle; r=rate of interest; n=number of terms)

Here P = $ 5000
r = 6%
n = 6 years (compounded annually)

Total amount = 5000 X ( (1 + 6/100) to the power of 6)
= 5000 X ( (1 + .06) to the power of 6)
= 5000 X ( 1.418519)
= 7092.59

Compound Interest = Total Amount - Initial Principle
= 7092.59 - 5000
= 2092.59

If you need any more clarifications please feel free to contact me at [e-mail]

Answer 3

The total on deposit is $5000, like you said. But total at maturity would be roughly $7093. That can be calculated by the equation FV = P(1 + r)^n FV = future value P= starting amount r= interest rate as a decimal n= number of years 5000(1+.06)^6

Answer 4

A = p(1+r)^t

A is the total amount in the years with interest. P is the principle amount ($5000). R is the rate (6%, written as 0.06). T is the time in years (6)

Answer 5

A = P(1 + r/n)^(nt)
P is the principle, the original amount.
r is the annual interest rate
n is the number of times a year its compounded
t is the number of years

A = 5000(1 + .06/1)^(1•6)
A = 5000(1.06)^6
A = 7092.60

Answer 6

You can Google the compound interst formula - it's a plug and play...

Excuse me, but "years" has nothing to do with it....

A = P(1 + r)n

Where r = rate per conversion period, and n = number of converesion periods (some banks have quarterly or daily interest.)

Ron.

Answer 7

(1+ 0.06)^6 = 1.42
1.42* 5000 = $7092.60

Answer 8

$7092.5954. That's the answer I don't know how I just asked my brother, he does Real Estate. But to round it off it'll be $7093.00.