Compound Interest Problem - Help Pls

cecilia

Staff member
Okay, i need help calculating this daily compound interest problem.
I've tried all the methods that i know of and so far, none seem right

What I need to do is find out the total compound amount of this problem by the end of the mature date (15 years)
The formula I've used was M=P(1+i) to the power of N.

Here's what you'll need.
1. my deposit amount is 30,000
2. the interest rate is 5%
3. it'll go on a 15 years period

Can someone help?
my head is spinning in circle at this late of an hour.
thanks in advance to whoever can help me out ..

CTR

The Realist guy here period
Principle = 30,000
Interest = 5%----- .05
N (years) = 15

M= 30,000*(1+.05)^15
M=(30000 +1500)^15
M= 62367.84538
M= 62,367.85

Hopefully, I am right. It has been a long time.

cecilia

Staff member
^thank you for helping ..

i only have one question though, DOES COMPOUNDING DAILY (365 days or 366 days) need to be put in to the formula too? OR it doesn't matter at all?

CTR

The Realist guy here period
^thank you for helping ..

i only have one question though, DOES COMPOUNDING DAILY (365 days or 366 days) need to be put in to the formula too? OR it doesn't matter at all?

I think that is a different situation. I don't know if that 5% is annual, semi-annual, quarterly, monthly, or weekly. However, I am sure it is not daily because banks would go out of business if they were to give 5% daily on investment.

Does the question ask us to compound daily? If so then it should be. If not then you should assume the answer above. The link below will explain the differences.

http://www.mymoneyblog.com/archives/2005/0...est_compou.html

cecilia

Staff member
ah, thanks so much for the link .. i believe the problem is relate to this solution:
DaBank:
Since DaBank compounds daily, you are getting 5%/365 = .0137% every day. So, at the end of the first day, you will have 10,000 x 1.000137 = \$10001.37. Using the same basic formula as above for 365 days:

\$10,000 x (1 + .05/365)365 = \$10,512.67.

So over the course of a year you’ve only earned \$1.05 more by compounding daily versus compounding monthly!

for my problem, IT COMPOUND DAILY for 10 YEARS ..
Using the top suggestion, this is what i'll do. Does it even look right?

30,000(1+.05/365)^365*10 ?

CTR

The Realist guy here period
ah, thanks so much for the link .. i believe the problem is relate to this solution:

for my problem, IT COMPOUND DAILY for 10 YEARS ..
Using the top suggestion, this is what i'll do. Does it even look right?

30,000(1+.05/365)^365*10 ?

That is correct.

M=30000*(1+.05/365)^365*10
M=30000*(1+1.00013699)^365*10
M=30000*1.00013699^3650
M=30000*1.648687
M=\$49,460.61

Hopefully, this will answer your question. The order of operations is what is hard here. B) ^_^ Sorry for the delay, I had to go somewhere this afternoon and tonight.

cecilia

Staff member
i've tried that before but it makes no sense to me LOl ..
after you look through, i have more confident in this answer ^^
thanks again for the help CTR

The Realist guy here period
i've tried that before but it makes no sense to me LOl ..
after you look through, i have more confident in this answer ^^
thanks again for the help N/P. I'm glad I can help. I took Accounting and Finance while majoring in Business Administration in college so it really came in handy. There used to be a formula you can insert into Excel to compound interest problems but I forgot it. If you have anymore questions, feel free to ask. If I can help, I will. B)

cecilia

Staff member
^cool. thank you na kha ^^