Sharp cs-2850 User Manual
Page 29
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COMPOUND INTEREST
Calculate the new balance on a deposit which is compounded quarterly for 4 years at
a given annual interest rate.
SOLUTION;
FORMULA:
EXAMPLE:
1. Calculate the quarterly interest rate.
2. Calculate the new balance (principal plus interest)
New balance = P (1 + i)"
Where
P = amount of deposit (principal)
i
= interest rate per period
n = number of years x 4
If
P = $6,150
i
= 5% annum -r 4 periods = 0.0125
n = 4 years x 4 periods = 16
Then 6,150 (1 + 0.0125)’® = $7,502.32 (New Balance)
(
1
)
(2)
(3)
(4)
.05 g]
0.05
0 05 -r
4 [1]
4 =
0.0125
a
0 0125 *
is
0.0125
a
0 0125 +
1
1.0125
a
1- +
s
1 0125 0
1.0125
10125
X
[S
1-0125 =
1.02515625
a
1 02515625 *
1.02515625
1 02515625
X
1 02515625 =
1.05094533691
a
1 05094533691
*
0
1.05094533691
1 05094533691
X
m
1 05094533691 =
1.10448610117
a
1-10448610117 *
0
1.10448610117
1-10448610117
X
s
1-10448610117 =
1.21988954767
a
1-21988954767
*
0
1.21988954767
1-21988954767 x
6150 [S
6-150- =
7,502.32071817
a
7-502 32071817
Annual int. rate
Quarterly int. rate
(1 +i)
(1 + i)*
(1 + i)^
(1 + 0®
(1 + i)««
Principal
New balance
27