Compound Intrest

I talked to my Mom about compound interest this weekend.  She agreed that it is a good way to have your money work for you, but she also said that it is hard to see a difference if your interest amount is low and you don’t have a big number to start with and you aren’t adding to it regularly.

We then tried an exercise using an online calculator below:

Compound Interest Calculator Top of Form Inputs Current Principal: $ Annual Addition: $ Years to grow:   Interest Rate:   % Compound interest time(s) annually Make additions at start end of each compounding period   Results Future Value: $ Bottom of Form
Top of Form Bottom of Form

We started with the money I have in a savings account in Washington DC.  We assumed we kept it for 5 years when I will done with high school.  

After this exercise we went to the Moodlic calculator, went back online for the calucation and used this formula make the problem:

M = P( 1 + i )ⁿ

M is the final amount including the principal.

P is the principal amount.

i is the rate of interest per year.

n is the number of years invested.

Applying the Formula

I have $7000.00 to invest for 5 years at rate of % compound interest.

M = 7000 (1 + 0.0135)⁵ = $1157.62.

SO, 7000*1.0693=

So my $7000.00 is worth $7485.43.