Formula

Example 1

*Step 1. * Identify the variables.

*A* is the ending amount, this is what you are trying to determine.

*P* is the beginning amount, in this case $1250.

*r* is the interest rate written in the form of a decimal, in this case 0.03.

*t* is the time in years, in this case 3 years.

*n* is the number of times compounded per year, in this case it is being compounded monthly and therefore *n* = 12.

*Step 2. * Substitute the variables into the formula.