Formula for 8 Percent Interest
Date: 5/31/96 at 22:5:0 From: Mark Kelly Subject: A formula needed I need a formula for this problem: I put $15 a month into a savings account. At the end of each year I get 8% interest. I repeat this again until three years has gone. Here are the answers if you work it out the long way (including 8 percent interest). First year: 194.40 Second year: 404.352 Third year: 631.10 I have tried and tried, and can't get a formula for it. A formula I want is something like this for a lump sum. A = P (1 + r / n ) power of (nt) Key: A = Money accumulated P = Principal amount r = Annual rate n = Number of compounding periods per year t = Number of years. Thank you.
Date: 6/1/96 at 1:17:58 From: Doctor Ken Subject: Re: A formula needed Hello - Here are a couple of hints on how to come up with a formula. You can kind of build the formula exactly the same way you did these "the long way." One thing you can do to simplify this problem is to notice that everything would work out the same if you put in all the money for a year at the same time (as long as it's before the interest is given to you!). So you don't really need to think about putting in $15 a month, you can just thing about it as $15 x 12 = $180 per year. So let's try starting to build a formula. Instead of simplifying after each step, let's just leave all the terms dangling all over the place, like this: 1 year: 1.08*180 2 years: 1.08*(1.08*180 + 180) 3 years: 1.08*(1.08*(1.08*180 + 180) + 180) Does this help you figure out the problem? Please feel free to write back if you work on it a while and you're still confused! -Doctor Ken, The Math Forum Check out our web site! http://mathforum.org/dr.math/
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