Compound Interest

Problem: In order to pay for college, the parents of a small child invest $20,000 in a savings bond that pays 8% interest compounded monthly. Find the future value of the investment after 16 years.

NOTE: The formula and the explanation of each letter used in the formula is found below.

Solution: We use the compound interest formula where we have P = 20,000, r = .08, n = 12, and t = 16.

The required keypresses and result are as follows:  

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The future value of the investment is $71,627.89



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