Compound Interest rate

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Compound Interest rate

Postby William » Tue Apr 23, 2013 4:16 am

IB Mathematical Studies, Financial Mathematics

How can we calculate for what annual rate of interest was paid for an amount of $24,000 to be deposit into an account that compounded quarterly and 2 years later the account totals $29,000?

Thanks
William
 
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Joined: Mon Jan 28, 2013 8:07 pm

Re: Compound Interest rate

Postby nicole » Tue Apr 23, 2013 4:24 am

IB Mathematical Studies, Financial Mathematics, annual rate of interest

The general compounding formula is:


Where F is the future value of the investment (=$29,000), P the principal (=$24,000), r is the interest rate per compound period (unknown in our case) and n is the number of compounding periods (2*4=8).
Therefore
(using solver or graph) and then multiply this number by 4 and get the interest rate per annum

The guidelines for doing this exercise directly to GDC Casio FX-9860 is
TVM -> F2: Compound Interest -> PV=24000, FV=-29000, P/Y=4, C/Y=4, n=8 and then press I% and get the same result (9.57%).

Hope these help!!
nicole
 
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Joined: Mon Jan 28, 2013 8:10 pm

Re: Compound Interest rate

Postby William » Tue Apr 23, 2013 4:28 am

Thanks Nicole!
William
 
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Joined: Mon Jan 28, 2013 8:07 pm


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