Compound Interest Cab913
1. The problem asks for the formula to find the maturity (future) value of compound interest.
2. The maturity value or future value $F$ in compound interest is calculated using the formula:
$$F = P(1 + r)^t$$
where:
- $P$ is the principal amount (initial investment),
- $r$ is the interest rate per period (expressed as a decimal),
- $t$ is the number of compounding periods.
3. Explanation:
- Compound interest means interest is earned on both the initial principal and the accumulated interest from previous periods.
- The formula $F = (1 + r)^t$ alone is incomplete because it does not include the principal $P$.
- The formula $F = P + I$ is also incomplete because it assumes simple interest where $I$ is interest earned, but does not account for compounding.
4. Therefore, the correct formula to find the maturity value with compound interest is:
$$F = P(1 + r)^t$$
Final answer: Use the formula $F = P(1 + r)^t$ to find the maturity (future) value of compound interest.