compound interest-how do I work it out?

grumbler

lipidicman wrote:

Also, where did you come across the simplification of q + q^2 + q^3+ q^4..... to get the final formula? Im have to verfied it, but havent found a derivation!

Look, for example, HERE. Thank you for support! :beer:

BrightonLad

budgetflyer wrote:

How do I work out the total
of say £10 per week for 10 years @ 5% PA?
keep it simple please

Perhaps this is a bit simpler!

lipidicman

grumbler wrote:

Yes
A*q*(q^N-1)/(q-1) means A*q*[(q^N)-1)]/(q-1)
However, the first expression is perfectly correct... :think:

Dude, I know you were right - all I was saying is that when you have to use ^ on this forum the extra brackets make it clearer for everyone. And thanks for the link for the sum of the geometric series!

Brightonlad - simpler, yes but it dont learn ya nuffink! and how do you know it is programmed right!?

BrightonLad

Brightonlad - simpler, yes but it dont learn ya nuffink! and how do you know it is programmed right!?

fair comment, i remember doing compound interest in GCSE maths, but would only be able do it now a long way round. thought i was pretty good at maths once upon a time! perhaps it should be evening classes for me!

lipidicman

Maybe Grumbler's offering classes? He is doing well so far!

lily10

I have read the article on compound interest and am tying myself in knots!
Can anyone help me with the following:
I am lending £10,000 to my husband's business . We have agreed that he will pay interest at 3% above base ( cheaper than bank charges) .
Currently base is 4.75% so interest will be 7.75% AER ( or is it APR?)
How do I calculate the compound interest on a monthly basis? this is because we have no definite time period for him borrowing the money - we may need to draw capital/interest as and when we need it, so I need to be able to see a monthly interest charge which i will either draw from the business as income or leave in the business to earn further interest.
Thanks for anyone's help

Chrismaths

If you are charging it monthly, then the monthly interest rate you need to compound up to 7.75% (APR) is (in general)

annual interest rate = r

(1+r)^(1/12)-1

So in your case this is 1.0775^(1/12)-1 = 0.624% per month.

So in the first month the interest payable will be £10000*.00624 = £62.40.

Remember to fill in a tax return to pay the tax though!