The Math Forum

Ask Dr. Math - Questions and Answers from our Archives
Associated Topics || Dr. Math Home || Search Dr. Math

15 Percent Annual Interest

Date: 8/24/96 at 0:1:51
From: Anonymous
Subject: Formula for Compound Intrest

I want to calculate the amount of money I will have in 29 years if I 
put $120 per month into an account that will earn 15 percent interest 
per year.

I have a TI 83 calculator and I do not agree with the answer that I am 
getting.  I believe that I must be doing something wrong.

If you can supply a formula for this problem it would be greatly 

Thank you,
Jim Eastman

Date: 8/25/96 at 15:54:45
From: Doctor Robert
Subject: Re: Formula for Compound Intrest

The answer, of course, depends on how often your interest is 
compounded. Since you keep adding to the principal, this is an 
annuity. The formula for the future value of an annuity is

  S = P((1+i)^n-1)/i  

where P is the amount invested each compounding period, i is the 
interest rate per period, and n is the number of periods.

If your money is invested at 15 percent annually, then you have 29 
compounding periods. n = 29, P = 12(120) and i = 0.15 (which seems 
pretty high).  

Mathematica says:

   12.0*120.0*((1.15)^29 - 1)/0.15 = 543124.

So S is approximately 543 thousand dollars.

If the interest is compounded monthly then n = (29)(12), i = .15/12,  
and P = 120.  Then S is approximately 714 thousand dollars. 

Does your TI-83 agree with these?

-Doctors Robert and Ken,  The Math Forum
 Check out our web site!   
Associated Topics:
High School Interest

Search the Dr. Math Library:

Find items containing (put spaces between keywords):
Click only once for faster results:

[ Choose "whole words" when searching for a word like age.]

all keywords, in any order at least one, that exact phrase
parts of words whole words

Submit your own question to Dr. Math

[Privacy Policy] [Terms of Use]

Math Forum Home || Math Library || Quick Reference || Math Forum Search

Ask Dr. MathTM
© 1994- The Math Forum at NCTM. All rights reserved.