# Thread: Financial mathematics (Geometric progression)

1. ## Financial mathematics (Geometric progression)

How much money have we on our bank account, if the bank can gave us at the end of every month 200$, for three years. The rate is 4% per anno, (that's 4% per year), decursive interest-rate, and the capitalisation time is one year. 2. Originally Posted by Nforce The rate is 4% per anno, (that's 4% per year), decursive interest-rate, and the capitalisation time is one year. Could you please rewrite this in "understandable" terms? Like, does$100 get interest of $4 after 1 year? Thank you. 3. Originally Posted by Wilmer Like, does$100 get interest of $4 after 1 year? Yes. But in the second year we get interest of 4,16$, because we have interest-on-interest. (4% of 104$is 4,16%) And so on... 4. Originally Posted by Nforce Yes. But in the second year we get interest of 4,16$, because we have interest-on-interest. (4% of 104$is 4,16%) And so on... You mean 12 monthly or continuous interest? I think the other fellow was asking about the stuffs like PV, FV, I, n, etc. 5. I mean continuous interest. For three years. (read my first post again) It should be solved with the help of geometric progression, but i always get a wrong result. 6. Originally Posted by Nforce Yes. But in the second year we get interest of 4,16$, because we have interest-on-interest. (4% of 104$is 4,16%) And so on... Ok; next time, simply say "4% compounded annually". Please use 4.16 (not 4,16) and$104 (not 104$); less confusion. 1st step is to get equivalent rate compounded monthly, since the$200 is paid monthly:
(1 + i)^12 = 1.04
1 + i = 1.04^(1/12)
i = 1.04^(1/12) - 1 ; that comes out to .00327....

Next is calculate present value (PV) of 36 monthly payments of $200: (formula is : PV = p[1 - 1/(1 + i)^n] / i) since p = 200, n = 36 and i = .00327 : PV = 200(1 - 1/1.00327^36) / .00327 ; roughly$6,781.92

Tu est d'accord?