Compounding Interest: Confirm my answers?

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SUMMARY

The discussion focuses on confirming calculations related to compounding interest using the formulas for future value (A) and present value (P). The participants provided specific values for principal (P), interest rate (r), time (t), and compounding frequency (c) for four scenarios. The calculated results were A = 4915.71 for the first scenario, P = 4305.55 for the second, P = 2566.88 for the third, and A = 4395.12 for the fourth. The answers provided by the original poster were mostly accurate, with minor discrepancies in the first and last calculations.

PREREQUISITES
  • Understanding of compounding interest formulas, specifically A = P(1 + r/n)^(nt) and P = A(1 + r/n)^(-nt)
  • Familiarity with financial terms such as principal (P), interest rate (r), time (t), and compounding frequency (c)
  • Basic proficiency in financial mathematics and calculations
  • Knowledge of how to convert time periods into appropriate units for compounding (e.g., months to years)
NEXT STEPS
  • Study the impact of different compounding frequencies on future value calculations
  • Explore advanced financial concepts such as continuous compounding and its formulas
  • Learn how to apply financial calculators or software for compounding interest scenarios
  • Investigate the effects of varying interest rates on investment growth over time
USEFUL FOR

This discussion is beneficial for finance students, financial analysts, and anyone involved in investment planning or personal finance management who seeks to understand and apply compounding interest calculations effectively.

eleventhxhour
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Find the missing information:

1) P = 3800, r = 8%, t = 39 months, c = quarterly, A = ?
2) P = ?, r = 7.5%, t = 2 years, c = monthly, A = 5,000
3) P = ?, r = 5.2%, t = 3 years, c = weekly, A = 3000
4) P = 3723, r = 6.75%, t = 30 months, c = semi annually, A = ?

My answers were:
1) A = 4912
2) P = 4306
3) P = 2566
4) A = 4395

Can someone confirm that my answers are correct? (you don't have to do all of them, but it would be really helpful! Also it said P or PV and A or FV in the question - I just wrote P and A)
 
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The formula we may begin with is:

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

the other form we will need is:

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

1.) $$A=3800\left(1+\frac{0.08}{4}\right)^{4\cdot3.25}\approx4915.71$$

2.) $$P=5000\left(1+\frac{0.075}{12}\right)^{-12\cdot2}\approx4305.55$$

3.) $$P=3000\left(1+\frac{0.052}{52}\right)^{-52\cdot3}\approx2566.88$$

4.) $$A=3723\left(1+\frac{0.0675}{2}\right)^{2\cdot2.5}\approx4395.12$$
 

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