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ohimai Group Title

if Jerry deposits $1000 initially at a 5% interest rate, how much savings does he accumulate in one year?

  • one year ago
  • one year ago

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  1. Kelumptus Group Title
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    Is the interest rate 5% per year and calculated yearly? If this is the case then it a case of taking the percentage of the $1000. To take a percentage of a number you multiple by the percent divided by 100. E.g. to take 37 percent of 130 you would first divide 37 by 100 which gives 0.37. You would then multiply 0.37 by 130 which gives 48.1. Does this help? Let me know if interest is not calculated per year as then it is compound interest which is calculated differently.

    • one year ago
  2. ohimai Group Title
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    The Interest is also calculated quarterly, monthly and semiannually. Is it a different method and how is this solved?

    • one year ago
  3. Kelumptus Group Title
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    So if it is calculated quarterly then the formula is \[P(I+\frac{ TotalPercent }{ NumberOfCalc })^{NumberOfCalc}\] For example, to calculate 20 percent interest per year, calculated quarterly, you would have: \[20(1+\frac{ 0.2 }{ 4 })^{4}\]

    • one year ago
  4. Kelumptus Group Title
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    As a quick approximation you can also use \[20e ^{0.2}\] You will see e on your calculator, it is a special constant called the Napier constant. It is defined a 2.7182818... Note that using 'e' is an approximation, not the actual answer. 'e' is derived from taking the same formula and setting 'NumberOfCalc' to infinity. You can therefore probably guess that as 'NumberOfCalc' increases, e becomes a closer approximation.

    • one year ago
  5. ohimai Group Title
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    thank you, this helps!!

    • one year ago
  6. Kelumptus Group Title
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    No problem =)

    • one year ago
  7. Kelumptus Group Title
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    One thing i forgot to mention in the above is that 'P' is the amount that you start with, before adding interest.

    • one year ago
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