Simple interest can be calculated using the formula below, where
I is the interest,
P is the
principal,
r is the interest rate, and
t is the time in years.
I = Prt
Compound interest can be calculated using the formula below, where
A is the
final amount,
P is the
principal,
r is the interest rate, and
t is the time in years.
A = P(1 + r)t
Use the compound interest formula to find the amount of money after 5 years.
A | = | P(1 + r)t |
| = | $1,200(1 + 0.04)5 |
| = | $1,200(1.04)5 |
| ≈ | $1,459.98 |