Sharp CS-2870 - Manual (Page 25)

COMPOUND INTEREST
Calculate the new balance on a deposit which is compounded quarterly for 4 years at
a given annual interest rate.
SOLUTION: 1. Calculate the quarterly interest rate.
2. Calculate the new balance (principal plus interest)
FORMULA: 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 -s- 4 periods = 0.0125
n = 4 years x 4 periods = 16
Then 6,150 (1 + 0.0125)^® = $7,502.32 (New Balance)
EXAMPLE:
(1) (2) (3) (4)
.05 0 0.05 0 05 ^
4 a 4' =
0.0125 0 0125 *
a
0.0125 00125 +
1 a 1.0125 1- +
s 1-0125 0
1.0125 1-0125 X
[i]
1-0125 ^
1.02515625 1-02515625 *
0 1.02515625 1-02515625 X
m 1-02515625 =
1.05094533691 1-05094533691 *
E 1.05094533691 1-05094533691 x
E 1-05094533691 =
1.10448610117 1-10448610117 =♦=
E 1.10448610117 1-10448610117 X
E
1-10448610117 =
1.21988954767 1-21988954767 >1'
E
1.21988954767 1-21988954767 x
6150 [±] 6.150- =
7,502.32071817 7.502-32071817 *■
— F
— 6
— 5
— 4
3
— 2
— 1
— 0
Annual int. rate
Quarterly int. rate
(1 +i)
(1+i)^
(1 + i)^
(1 +i)B
(1 +i)’
Principal
New balance
23