# Compound interest...?

• January 6th 2010, 12:23 PM
Mukilab
Compound interest...?
Bill invests £500 on the 1st Jan 2004 at a compound interest of R% per annum. The value, £V, of this investment after n years is given by the formula V=500x(1.045)^n

Write down the value of R

O-o?????
• January 6th 2010, 12:26 PM
pickslides
This formula usually looks like

$A=P\left(1+\frac{r}{100}\right)^n$

• January 6th 2010, 12:28 PM
Mukilab
Quote:

Originally Posted by pickslides
This formula usually looks like

$A=P\left(1+\frac{r}{100}\right)^n$

Could you explain A and P. Right now I assume A= £V and P=500*(1.045)^n
• January 6th 2010, 12:32 PM
pickslides
Quote:

Originally Posted by Mukilab
Could you explain A and P. Right now I assume A= £V and P=500*(1.045)^n

A is the output from the investment or loan

P is 500 in your case, it is the amount invested or loaned
• January 6th 2010, 12:39 PM
Mukilab
Can you go through the actual process?

Ok A=P(1+ $\frac{r}{100})^{n}$

So

$A=500(1+\frac{r}{100})^{n}$

Let's say n = 2

$A=500(1+\frac{r}{100})^{2} A=500(2+\frac{2r}{200}???$
• January 6th 2010, 12:50 PM
pickslides
Quote:

Originally Posted by Mukilab

Let's say n = 2

$A=500(1+\frac{r}{100})^{2} A=500(2+\frac{2r}{200}???$

The 2 does not distribute through like you have shown

$(a+b)^2 = (a+b)(a+b) \neq (2a+2b)$

I found your r by inspection as it was in the same form as something I was familiar with. To do what you have attempted you must have a value for A as well.
• January 7th 2010, 07:41 AM
Mukilab
So I need a value for A? They just say that the value is V.

I'll post the actual question when I find it, although I think it is unnecessary as I have posted all the core parts that I need answering, I am sure I have not missed something out
• January 7th 2010, 07:58 AM
e^(i*pi)
Quote:

Originally Posted by Mukilab
So I need a value for A? They just say that the value is V.

I'll post the actual question when I find it, although I think it is unnecessary as I have posted all the core parts that I need answering, I am sure I have not missed something out

A = V in your case

You're expected to know the compound interest formula given in post 2
• January 7th 2010, 08:44 AM
Mukilab
Quote:

Originally Posted by e^(i*pi)
A = V in your case

You're expected to know the compound interest formula given in post 2

From now on, every formula I come across in life I will plot onto my posters...