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Math Help - Calculation of Interest

  1. #1
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    Calculation of Interest

    Hi all, was wondering if someone could help me in solving this formula:

    I want to add a certain percentage of interest to a capital amount for a certain number of months. I don't know how to calculate the formula. remember the capital amount will be growing every month.

    Example: Capital = 1000 Interest = 5% Months = 3

    1000 + 5% = 1050
    1050 + 5% = 1102.50
    1102.50 + 5% = 1157.62

    What would the formula for this be if Capital was X, Interest was Y and Months where Z?
    Please guys I really want to use this formula in a Excel spreadsheet
    All Help appreciated!
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  2. #2
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    e^(i*pi)'s Avatar
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    Unless I'm misunderstanding something you can use the compound interest formula:

    P(t) = P_0 \left(1+\dfrac{r}{n}\right)^{nt}

    where:
    • P_t = amount at time t
    • P_0 = initial/principal
    • n = number of annual compounds (if you're compounding monthly it's 12)
    • r = annualised rate (APR)
    • t = time



    In your case you can simplify to P_t = P_0(1+r)^t - but set r to the monthly rate (5%) and t to months
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