Compound Interest

Bob · 2011-04-13 00:55:39

hi bobbym,

Interesting. At the end of the twelth month I get $1213.88.

Then if you add the next $98 this brings it to 1311.88 which is close but not the same as your 1312.92(9).

I've played about with the interest rates and I get your answer if I use a monthly rate of 0.5% = 6% /12

As you know from a previous post, I don't think that is right.

Also why add on the 13th amount? This happens at the start of year 2 not the end of year 1.

My difficulty is "The original problem does not make these fine details clear (not the poster's fault; it's the way it has been worded in the question).

It may seem like a minor point but banks have to be accurate down to the cent or they'd be in big trouble with confidence.

For the same reason I think you'll find they round 1312.929 up by the usual rules. That way they neither profit nor lose from rounding effects over a large number of transactions.

Hi survival,

I've just read your intro. The TI84 will let you enter a list of numbers and store them. Then you can get it to tell you the mean, median and standard deviation. Look up in the stats chapter of the manual.

Bob

Last edited by Bob (2011-04-13 01:33:00)

bobbym · 2011-04-13 07:15:41

Hi Bob;

First, let me say. You may be right. Or I may be right. Or we both may be right. Or we both may be wrong. I do not take any chances. They say I have a lot of gamble in me since I never let any of it out.

As you know from a previous post, I don't think that is right.

We did talk about that only briefly. Please take a look over here, close to the bottom for compound interest. What is happening there?

survival · 2011-04-13 17:20:41

i am back. The 98.00 is compounded monthly. Nothing is being added each month but interest of 6%.

$98.00 (1.06/12) 120 days
.06/12 =.005 (i don't need to use this)

1 yr. = 12 x 1.06 x 98.00 = 70.56
10 yrs. = 120 x 1.06 x 98.00 = 1246.56
20 yrs. = 240 x 1.06 x 98.00 =2493.12
30 yrs. = 360 x 1.06 x 98.00 = 37396.80

Please see if this is right. I have to turn it in. Thank you.

bobbym · 2011-04-13 19:29:24

Hi survival;

Here is what I am getting
1 yr = 104.04,
10 yrs = 178.30,
30 years =590.21

survival · 2011-04-13 19:55:30

I have a problem then.
If the interest is 6%, where did i get that 1.06 and how come I have such large results?

bobbym · 2011-04-13 20:09:06

Hi survival;

Here is a simply way to look at it. Round that 98 to 100. Say that you get 6% per year compounded annually. Thay is going to be roughly 60 dollars of interest. So a rough estimate is 160 dollars after 10 years. 178.30 is a lot closer to that then 1246.66 is.

survival · 2011-04-13 20:10:51

okay, maybe i got the 1.06 since it compounds monthly? This is confusing

survival · 2011-04-13 20:15:21

well, i asked a math tutor to look at it this morning and he just glanced at it. He said the first month would be 70.56. it seems too much for one month, then go to 10, 20, 30. Something is wrong.
I can't round the 98.00. My professor would not like rounding that since it is a project with more of it over two weeks.

survival · 2011-04-13 20:18:23

oh i see. he got that 70.56 from the entire first year. (12) the rest of it is all wrong maybe

bobbym · 2011-04-13 20:21:27

Hi survival;

I can't round the 98.00. My professor would not like rounding

I did not say round it for your answer. I said round it to estimate the answer. I used 3 different interest rate calculators to get my numbers

survival · 2011-04-13 20:24:04

i have to show how i got the answer. How do you show it if done on a calculator? He wants to see how a person arrives at an answer.

survival · 2011-04-13 20:28:21

i will check back when i take a nap. I have to get this right or my grade is gone out the window.

bobbym · 2011-04-13 20:48:55

Hi survival;

Here is the formula I am using. Straight from Wikipedia, 1 / 3 down the page.

http://en.wikipedia.org/wiki/Compound_interest

A = final amount
P = principal amount (initial investment)
r = annual nominal interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years

That is for one year.

That is for 10 years.

That is for 30 years.

survival · 2011-04-14 02:10:52

that is the formula i am asked to use. Same one for 10, 20 and 30 yr. period.

survival · 2011-04-14 02:31:26

i will be back. Thank you.

survival · 2011-04-14 05:41:53

If it calculates 5.88 monthly from the 6%, isn't it multiplied by each month or is it already included in
the totals you have?
Your figures are accurate, I just don't know how to show the multiplication to get them. He doesn't want to see the formula again since he knows it.
Thank you

bobbym · 2011-04-14 06:17:47

Hi survival;

I am not following you as to where you are in trouble. You plug in to the formula and then use a calculator. That is all there is to it.

If your teacher has a problem with that then you send him/her to see ole bobbym and I will give him/her a verbal lashing. I will do it by being ultra nice to him/her. Kill em with kindness so to speak.

survival · 2011-04-14 07:22:14

see you later. i am to work for 4 hours. tomorrow i have to turn that first part of the project in. I don't think the second one will be so frustrating.
thank you for your help.

bobbym · 2011-04-14 07:42:22

Are you sure you understand everything we talked about?

survival · 2011-04-14 09:52:52

no, i do not understand. I see some places where it is calculated with .05. There are several calculators online and some give different answers.
I put the numbers you gave me into my project. It seems such a small amount to earn over so many years.

bobbym · 2011-04-14 14:43:56

Hi survival;

You only are investing 98 dollars and end end up with over 500!

What calculators did you use? I used 3 online and used my own recursion formula and got this answer.

Math Is Fun Forum

#26 2011-04-13 00:55:39

Re: Compound Interest

#27 2011-04-13 07:15:41

Re: Compound Interest

#28 2011-04-13 17:20:41

Re: Compound Interest

#29 2011-04-13 19:29:24

Re: Compound Interest

#30 2011-04-13 19:55:30

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#31 2011-04-13 20:09:06

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#32 2011-04-13 20:10:51

Re: Compound Interest

#33 2011-04-13 20:15:21

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#34 2011-04-13 20:18:23

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#35 2011-04-13 20:21:27

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#36 2011-04-13 20:24:04

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#37 2011-04-13 20:28:21

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#38 2011-04-13 20:48:55

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#39 2011-04-14 02:10:52

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#40 2011-04-14 02:31:26

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#41 2011-04-14 05:41:53

Re: Compound Interest

#42 2011-04-14 06:17:47

Re: Compound Interest

#43 2011-04-14 07:22:14

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#44 2011-04-14 07:42:22

Re: Compound Interest

#45 2011-04-14 09:52:52

Re: Compound Interest

#46 2011-04-14 14:43:56

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