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compound interest-how do I work it out?
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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!0
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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!0 -
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!?0 -
Brightonlad - simpler, yes but it dont learn ya nuffink! and how do you know it is programmed right!?0
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Maybe Grumbler's offering classes? He is doing well so far!0
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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 help0 -
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!I'm an Investment Manager. Any comments I make on this board should be not be construed as advice, and are for general information purposes only.0
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