Results 1 to 9 of 9

Math Help - compound interest

  1. #1
    Newbie
    Joined
    Aug 2012
    From
    Manchester
    Posts
    15

    compound interest

    Compound interest is interest paid on an amount and on the interest already received on that amount. You can solve compound interest questions using the formula :

    A = P ( 1 + R divided by 100 ) to the power of n

    where P is the amount invested initially
    R is the rate of interest (percentage per year)
    n is the number of years invested
    A is the amount in the account at the end of ten years

    A building society pays compound interest at a fixed rate of 3.5% per annum. 2000 is invested initially in an account.

    What will be the value at the end of 5 years?
    After how many whole years will the value of the account first reach 3000?



    So is the solution: 2000 (1 + 3.5 divided by 100 ) power of 5 = 2375.37

    And 12 years

    Follow Math Help Forum on Facebook and Google+

  2. #2
    Senior Member MaxJasper's Avatar
    Joined
    Aug 2012
    From
    Canada
    Posts
    482
    Thanks
    54

    Re: compound interest

    2375.37 is correct.
    After 12 whole years value will be 3022.14
    Last edited by MaxJasper; August 26th 2012 at 05:04 PM.
    Follow Math Help Forum on Facebook and Google+

  3. #3
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,106
    Thanks
    68

    Re: compound interest

    Quote Originally Posted by mathsgirl123431 View Post
    A = P ( 1 + R divided by 100 ) to the power of n
    where P is the amount invested initially
    R is the rate of interest (percentage per year)
    n is the number of years invested
    A is the amount in the account at the end of ten years : .....end of n years !
    In the standard formula, r / 100 is shown as i :
    A = P(1 + i)^n

    Isolating n: n = LOG(A/P) / LOG(1 + i)

    So the 3000 is reached in ~11.786 years (not 12)
    LOG(3000/2000) / LOG(1.035) = 11.786....

    WHAT is your question anyway? I see none...
    Follow Math Help Forum on Facebook and Google+

  4. #4
    MHF Contributor

    Joined
    Apr 2005
    Posts
    15,780
    Thanks
    1519

    Re: compound interest

    Quote Originally Posted by mathsgirl123431 View Post
    Compound interest is interest paid on an amount and on the interest already received on that amount. You can solve compound interest questions using the formula :

    A = P ( 1 + R divided by 100 ) to the power of n

    where P is the amount invested initially
    R is the rate of interest (percentage per year)
    n is the number of years invested
    A is the amount in the account at the end of ten years

    A building society pays compound interest at a fixed rate of 3.5% per annum. 2000 is invested initially in an account.

    What will be the value at the end of 5 years?
    After how many whole years will the value of the account first reach 3000?



    So is the solution: 2000 (1 + 3.5 divided by 100 ) power of 5 = 2375.37

    And 12 years

    No, neither of those is correct. Perhaps if you told us exactly what you did we could point out a mistake. For example in the first problem, you do want to calculate 2000(1.35)^5. But that is NOT 2375.37.
    Follow Math Help Forum on Facebook and Google+

  5. #5
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,106
    Thanks
    68

    Re: compound interest

    Quote Originally Posted by HallsofIvy View Post
    No, neither of those is correct. Perhaps if you told us exactly what you did we could point out a mistake. For example in the first problem, you do want to calculate 2000(1.35)^5. But that is NOT 2375.37.
    Halls, 2000(1.035)^5 = 2375.3726.....; so that one is correct. You're a generous Banker, paying 35% !
    Follow Math Help Forum on Facebook and Google+

  6. #6
    MHF Contributor

    Joined
    Apr 2005
    Posts
    15,780
    Thanks
    1519

    Re: compound interest

    Ouch! No wonder I'm going broke!
    Follow Math Help Forum on Facebook and Google+

  7. #7
    Newbie
    Joined
    Aug 2012
    From
    Manchester
    Posts
    15

    Re: compound interest

    But the question says how many whole years, so wouldn't it be 12?
    Because 11.786 isn't a whole year, and after 11 years it's not yet at 3000, or am I just overthinking the question?
    Follow Math Help Forum on Facebook and Google+

  8. #8
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,106
    Thanks
    68

    Re: compound interest

    Quote Originally Posted by mathsgirl123431 View Post
    But the question says how many whole years, so wouldn't it be 12?
    Because 11.786 isn't a whole year, and after 11 years it's not yet at 3000, or am I just overthinking the question?
    Whatever. I gave you the "exact" time; you're correct with 12 as "whole years".
    Follow Math Help Forum on Facebook and Google+

  9. #9
    Newbie
    Joined
    Aug 2012
    From
    Manchester
    Posts
    15

    Re: compound interest

    Okay, thanks for taking the time to show me how too work it out exactly Wilmer
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Compound interest.
    Posted in the Business Math Forum
    Replies: 3
    Last Post: January 5th 2012, 09:26 AM
  2. Compound interest at changing interest rates
    Posted in the Business Math Forum
    Replies: 2
    Last Post: October 21st 2010, 04:55 AM
  3. compound interest
    Posted in the Algebra Forum
    Replies: 4
    Last Post: August 5th 2009, 04:07 PM
  4. compound interest
    Posted in the Algebra Forum
    Replies: 2
    Last Post: April 26th 2009, 10:05 PM
  5. Compound interest!
    Posted in the Business Math Forum
    Replies: 1
    Last Post: May 20th 2008, 05:02 AM

Search Tags


/mathhelpforum @mathhelpforum