Most investors and the population in general is making very slow progress in saving for retirement, so I'd like to be the one that fixes the problem. Compond interest is very powerful in making savings grow, so what I want to do is either compound it exponentially or have the principal deposits come from millions of people. I know there are mathematical formulas but am not sure what one I could use to get started.
2006-06-20 12:56:39 · 3 answers · asked by USA Patriot 1 in Business & Finance ➔ Investing
Interest and Exponential Growth
The Compound Interest Equation
P = C (1 + r/n) nt
where
P = future value
C = initial deposit
r = interest rate (expressed as a fraction: eg. 0.06)
n = # of times per year interest in compounded
t = number of years invested
Simplified Compound Interest Equation
When interest is only compounded once per yer (n=1), the equation simplifies to:
P = C (1 + r) t
Continuous Compound Interest
When interest is compounded continually (i.e. n --> ), the compound interest equation takes the form:
P = C e rt
Demonstration of Various Compounding
The following table shows the final principal (P), after t = 1 year, of an account initally with C = $10000, at 6% interest rate, with the given compounding (n). As is shown, the method of compounding has little effect. n P
1 (yearly) $ 10600.00
2 (semi-anually) $ 10609.00
4 (quarterly) $ 10613.64
12 (monthly) $ 10616.78
52 (weekly) $ 10618.00
365 (daily) $ 10618.31
continuous $ 10618.37
Loan Balance
Situation: A person initially borrows an amount A and in return agrees to make n repayments per year, each of an amount P. While the person is repaying the loan, interest is accumulating at an annual percentage rate of r, and this interest is compounded n times a year (along with each payment). Therefore, the person must continue paying these installments of amount P until the original amount and any accumulated interest is repayed. This equation gives the amount B that the person still needs to repay after t years.
B = A (1 + r/n)nt - P (1 + r/n)nt - 1
--------------------------------------------------------------------------------
(1 + r/n) - 1
where
B = balance after t years
A = amount borrowed
n = number of payments per year
P = amount paid per payment
r = annual percentage rate (APR)
2006-06-20 13:02:14 · answer #1 · answered by Anonymous · 1⤊ 0⤋
This is where your creativity and intelligence come into play. Be an expert in one area of investing - please, not mutual funds or savings! - or hire an expert to show you what to do.
Royalties are really good. Make 1 original thing (be it a song, a book, etc), make a lot of copies, and sell it to the population - watch your money multiply - FAST!
2006-06-20 13:04:05 · answer #2 · answered by Josefina R 2 · 0⤊ 0⤋
Pyramid schemes are illegal!
2006-06-20 13:00:36 · answer #3 · answered by sideshot72 3 · 0⤊ 0⤋