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# Advanced Math/Compound Interest

Question
Hello:

If an investment earns 20% compound interest per month, how is the annual (annualized) rate determined, that is, what is the percentage per year?

An interest rate of 20% is the same as an interest rate of 0.20.
If it is compounded monthly, take 0.20/12 and get 0.05/3 each month.

That is how much the amount of money increases by, so we have to put a 1 in to keep the original.

This means each month the money is multiplied by 1 + 0.05/3
to get the amount at the end of the month.

Since there are 12 months, this is done 12 times.
That means we multiply by (1 + 0.05/3)^12.
That is the same as multiplying the money by 1.2194.

Subtracting off the 1 for the original value, that leaves 0.2194.
That is the same as 21.94%.
That can be rounded to roughly 22%.

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#### Scott A Wilson

##### Expertise

I can answer any question in general math, arithetic, discret math, algebra, box problems, geometry, filling a tank with water, trigonometry, pre-calculus, linear algebra, complex mathematics, probability, statistics, and most of anything else that relates to math. I can also say that I broke 5 minutes for a mile, which is over 12 mph, but is that relevant?

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Experience in the area; I have tutored people in the above areas of mathematics for over two years in AllExperts.com. I have tutored people here and there in mathematics since before I received a BS degree back in 1984. In just two more years, I received an MS degree as well, but more on that later. I tutored at OSU in the math center for all six years I was there. Most students offering assistance were juniors, seniors, or graduate students. I was allowed to tutor as a freshman. I tutored at Mathnasium for well over a year. I worked at The Boeing Company for over 5 years. I received an MS degreee in Mathematics from Oregon State Univeristy. The classes I took were over 100 hours of upper division credits in mathematical courses such as calculus, statistics, probabilty, linear algrebra, powers, linear regression, matrices, and more. I graduated with honors in both my BS and MS degrees. Past/Present Clients: College Students at Oregon State University, various math people since college, over 7,500 people on the PC from the US and rest the world.

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My master's paper was published in the OSU journal. The subject of it was Numerical Analysis used in shock waves and rarefaction fans. It dealt with discontinuities that arose over time. They were solved using the Leap Frog method. That method was used and improvements of it were shown. The improvements were by Enquist-Osher, Godunov, and Lax-Wendroff.

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Master of Science at OSU with high honors in mathematics. Bachelor of Science at OSU with high honors in mathematical sciences. This degree involved mathematics, statistics, and computer science. I also took sophmore level physics and chemistry while I was attending college. On the side I took raquetball, but that's still not relevant.

Awards and Honors
I earned high honors in both my BS degree and MS degree from Oregon State. I was in near the top in most of my classes. In several classes in mathematics, I was first. In a class of over 100 students, I was always one of the first ones to complete the test. I graduated with well over 50 credits in upper division mathematics.

Past/Present Clients
My clients have been students at OSU, people who live nearby, friends with math questions, and several people every day on the PC. I would guess that you are probably going to be one more.