EXAMPLE 4 Compound Interest for Several Years
Suppose that you have a principal of invested at 10% nominal interest per year. Using the compound interest formula , we determine the amount in the account after 10 years, for annual, quarterly, and monthly compounding.
Annual compounding. The annual rate of 10% gives , and after 10 years, the account has
Quarterly compounding. Then , and after 10 years () the account contains
Monthly compounding. Then . The amount in the account after 10 years () is
These entries are found in the last row of Table 21.2 on page 873.