Sharp QS-1760A QS-2770A/2760A/1760A Operation Manual - Page 29
Compound, Interest
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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: 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) = interest rate per period n = number of years x 4 EXAMPLE: If P = $6,150 = 5% annum ÷ 4 periods = 0.0125 n = 4 years x 4 periods = 16 Then 6,150 (1 + 0.0125)16 $7,502.32 (New Balance) (QS-2760A/2770A): (1) (2) -F .05 -6 -5 4 -4 -3 -2 -1 -o 1 (3) 0.05 0.0125 0.0125 1.0125 1.0125 1.02515625 1.02515625 11 1.05094533691 0 1.05094533691 1.10448610117 0 1.10448610117 0 6150 1.21988954767 1.21988954767 7,502.32071817 (4) 0.05 + 4• = 0.0125 * 0.0125 + 1• + 1.0125 0 1.0125 x 1.0125 = 1.02515625 * 1.02515625 x 1.02515625 = 1.05094533691 * 1.05094533691 x 1.05094533691 = 1.10448610117 * 1.10448610117 x 1.10448610117 = 1.21988954767 * 1.21988954767 x 6.150• = 7,502.32071817 * Annual int. rate Quarterly int. rate (1 +1) (1 i)2 (1 + i)4 (1 + i)8 (1 + i)18 Principal New balance 27