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Finishing capital = starting capital x (1 plus interest rate) to the power of the term.
EG 1000 units at 5% over 7 years = 1000 x (1.05 to the power 7)
Easiest way to do this is to use logarithms:
1000 x antilog (7 x log 1.05) = 1000 x antilog 0.1483251
= 1000 x 1.4071
= 1407.1 units
This compares with simple interest where finishing capital would be 1350 units.
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What is 'Annual Equivalent Rate'?
Interest payments can calculated annually, quarterly, monthly, daily or even continuously. To enable consumers to compare rates quoted over different periods, many authorities require financial institutions to calculate the total compound interest over a year. That is the AER.
What is a table that shows annual compound rates of growth between selected periods of time?
Growth triangle
Why present values are dependent upon interest rates?
Interest rates are also known as discount rates because in order to calculate the present value of a future amount, the future amount must be discounted back to the present
What two factors are most important in determining the power of compound interest?
The interest rates paid on the deposited money and the number of years you leave the money in the bank.
Write a C program which will ask the operator to enter amount to be invested for the period of investment and the rate of interest for simple interest and compound interest calculation?
Or you could just do the same thing in a spreadsheet without having to pay commercial rates for the program to be written for you
