Compound interest question.

• November 17th 2008, 11:22 AM
Retikx
Compound interest question.
$250 per month is invested in an account that earns 9% per year, compounded monthly. What will the total in the account be at the end of 5 years. I have a formula on my work sheet that is supposed to solve this but every time i try to use it i get wayy wrong answers.. I am either doing something wrong on my calc or the formula has been incorrectly presented. If someone could explain a simple formula for this question it would be great. THANKS This saving calc http://www.bankwest.ca/Calculators/C...r.aspx?calc=11 gives me the answer i need but its the formula that i need to make sense of all this.. • November 17th 2008, 11:43 AM TitaniumX Quote: Originally Posted by Retikx$250 per month is invested in an account that earns 9% per year, compounded monthly. What will the total in the account be at the end of 5 years.

I have a formula on my work sheet that is supposed to solve this but every time i try to use it i get wayy wrong answers.. I am either doing something wrong on my calc or the formula has been incorrectly presented. If someone could explain a simple formula for this question it would be great.

THANKS

This saving calc Bank West - Financial Calculators - Savings Calculator gives me the answer i need but its the formula that i need to make sense of all this..

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

P = principle
r= interest rate as a decimal (e.g. 10% is 0.1)
t = time in year
A = net amount
n = # of times interest is compounder a math

$A=250\left(1+\frac{0.09}{12}\right)^{12*5}$

$= 391.42$
• November 17th 2008, 11:56 AM
Retikx
ooook, buuuut. Im still getting the wrong answer?? i must be doing something wrong on my calculator... forgive my ignorance but what do i do with the 12*5 ??? this is an exponent correct? ahhh i know this is simple but its frustrating, i just think i lack the general knoledge of the calculator..
• November 17th 2008, 12:00 PM
TitaniumX
Quote:

Originally Posted by Retikx
ooook, buuuut. Im still getting the wrong answer?? i must be doing something wrong on my calculator... forgive my ignorance but what do i do with the 12*5 ??? this is an exponent correct? ahhh i know this is simple but its frustrating, i just think i lack the general knoledge of the calculator..

Just replace 12*5 with 60. I wrote that down instead of 60 to show that that nt = 12*5 = 60

so....

$A=250\left(1+\frac{0.09}{12}\right)^{12*5}$

= $A=250\left(1+\frac{0.09}{12}\right)^{60}$

To type that into the calculator... just type this... in the following in the order they appear

Quote:

250(1+0.09/12)^60 ENTER
If you have a very ancient, lame calculator.... then type:

0.09/12 ENTER
• November 17th 2008, 12:07 PM
Retikx
Ok yes , i get the 391.42 result. But this is not the end product i need.. I need to know what will be in the account after 5 years of investing 250 per month compounded monthly at 9% per year... 391.42 does not give me that.. I'm probably missing something obvious here.. help??
• November 17th 2008, 12:51 PM
Retikx
helllllllllllp
• November 17th 2008, 01:02 PM
TitaniumX
Quote:

Originally Posted by Retikx
Ok yes , i get the 391.42 result. But this is not the end product i need.. I need to know what will be in the account after 5 years of investing 250 per month compounded monthly at 9% per year... 391.42 does not give me that.. I'm probably missing something obvious here.. help??

Ah, I scanned through it and didn't see you want a monthly addition to it.

i = r/12 = 0.09/12 = 0.0075

FV (Future Value) = 250(1+i)( ((1+i)^(n*t) -1)) / i )

= 250(1.0075)( (1.0075^60 - 1) / 0.0075) = 18997.45
• November 17th 2008, 01:26 PM
Retikx
ok yes you are on the right track and that is the right answer, but i already got the final answer using this calculator Bank West - Financial Calculators - Savings Calculator What im REALLY interested in is a formula that encompasses all this info. looking at what you wrote im very confused... so many brackets... I tried to put your solution in the calculator and i was totaly lost..
• November 17th 2008, 01:37 PM
TitaniumX
Quote:

Originally Posted by Retikx
ok yes you are on the right track and that is the right answer, but i already got the final answer using this calculator Bank West - Financial Calculators - Savings Calculator What im REALLY interested in is a formula that encompasses all this info. looking at what you wrote im very confused... so many brackets... I tried to put your solution in the calculator and i was totaly lost..

I will go home in a few hours and put it in pretty print (unless someone else wants to do it)

And I already gave you the general formula. Quoting myself...

FV (Future Value) = MONTHLYADDITION(1+i)( ((1+i)^(n*t) -1)) / i )

i = r/12 = 0.09/12 = 0.0075
• November 17th 2008, 01:50 PM
Retikx
Thank you again but i dont know how to input this (1+i)( ((1+i)^(n*t) -1)) / i ) into the calculator every time i try i get the wrong answers..