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Basic Math/compound interest

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Expert: Josh - 2/4/2007


Question
If you open an interest bearing checking account and you deposit $180,000 with interest of 0.05 percent compounded daily, what would you have saved in a year if you never touched it.  

Answer
Key thing to note is that interest is compounded daily.
In one year, the deposit would have been compounded N=365 times.

Using the standard compound interest formula (you should have seen how it is derived once in your life), we have

A(N)=P*(1+r)^N,

where A(N) is amount after N periods have elapsed, N is measured in days here, P=principal, r=0.05/100 is the applicable interest rate.

A(365)=180000*(1+0.05/100)^365
     =$216028.69

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Josh

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When I work through problems, I like to emphasize concepts which I believe are worth noting. I will try to answer questions in the following areas, but not at the advanced level. Algebra. Sequences & Series. Trigonometry. Functions & Graphs. Coordinate Geometry. Quadratic Polynomials. Exponential & Logarithms. Basic Calculus. Probability, Permutation and Combination. Mathematical Induction. Complex numbers. Physics problems.

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I have worked as a teaching assistant in college. My hope is that more people will share knowledge without boundary, give help without seeking recognition or monetary rewards.

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Bachelor degree in Engineering Science

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