Deriving the Annual Compound Interest Formula

[HerroKerushii]

thanks!!!!!!!!!!!!!!!!

[chocopie645]

thanks for the help! wayy better than my math teacher blabbing on and on D:

but i'm still wondering, why is the 1+ there in the 1+ .06 ?

(sorry if that sounds stupid, but pleease reply!)

thanks :)

@patrickJMT

[patrickJMT]

@chocopie645 if you multiply a number by 1, it does not change. if you multiply it by 1.06, it gets larger by .06 or 6%

[cyqnus]

enable the caption and then see at 0:23, I guess the caption feature might get busted

[hankOSFP1234]

it is einstein

wake up mr jordan

[MrJordan20061991]

Isn`t it 0.06 because it is 6% , not 60

[laxmanica43]

@MrJordan20061991 he does use .06, he just simplifies the (1+.06)

[MetalBassjunkie420]

Do you have a video where I can find help for calculations like this one?: What is the value of an annuity that will pay you $5000 each year for 30 years at a discount rate of 6%? What is the value of the annuity if you use a 12% discount rate?

[patrickJMT]

@MetalBassjunkie420 i do not have any videos about annuities although i may make some soon!

[ian559fresno]

@patrickJMT Dear Patrick, can you please make a video on Newton's law of cooling? I searched it on youtube and it was a suggestion with your name next to it but I guess there was no video. (Search Newtons law of cooling p...and patrickjmt pops up next to it)? Thanks

[dineshtakyar]

Very neatly explained. Thanks.

[afreakenracoon]

HELP!!!

a car was bought for 25000$, each year it depreciates by 15%...

a) write an exponential formula that demostrates the cars value in (n) amount of years after it was purchased/

b) what is the cars value at the end of 3 years

c) after how many years will the value of the car be half of the original price?

PLZ HELP!!!! THANK YOU!!!

[macskap]

@afreakenracoon c1=c0*(1-k)^^n

c1: the value of the car after n years

c0: the value of the new car

k: interest rate (0.15 cause you have 15%)

n: amount of years

RU learning for a high school final exam? .)

[afreakenracoon]

@macskap thanks alot this question was really messing with me :P and ya it was for my grade 11 math exam

[Truefirech]

Thanks a million my man, clearly laid out in laymen's terms to assist persons having difficulty with compound interest formulas.

It did indeed help, thanks. Chris

[M8chxD]

i needed this for my exam i think i get it but i have a sore head now lol :) xx

[SacredB48]

OMG you totally just saved my life!!!!!!!!!!!!!!!!!!!!! i forgot how to do this in math class. im so glad i found this video

[gikaysha]

very useful video and very practicall

[kadabiaiya]

thank you - this helps me a great deal with my distance learining program. cheers

[MoneyCashDough]

why is %6 1.06 instead of .06

[Alternamaton]

6% is .06, but 1.06 should be thought of as (1+ .06), because we take (1 + .06) and multiply it by our current principal balance to find our new balance after one compounding period. We have our original principal plus 6% of our original principal, and if you apply the distributive property of multiplication to P(1 + .06) you'll see that it's just a compact way of expressing that.

[murderline323]

this is a good way of compound growth and decay however there is an easier method which is following this formulae:

N=No(1+r/100)n

WHERE No=THE INITIAL AMOUNT

r/100=THE PERCENTAGE APR

n=THE NUMBER OF YEARS/DAY/YEAR

AND N=THE FINAL AMOUNT

TRY IT IT ACTUALLY WORKS AND IS THE BEST METHOD I KNOW

FOR EXAMPLE N=1200(1+5/100)3

N=£1389.15

[taek4ma]

thank you!! I wasn't really sure how to calculate present value/ future value of annuinity,but after watching your video i clearly understand how it works :)

[roozterchick]

I was hoping for that too.. But I found a formula.. I trying to work on it right now :p Hope it helps :p

Quarterly = P (1 + r/4)4 = (quarterly compounding)

[MarylandJuly89]

annual only means year correct?

What if the problem ask for the interest accumulated at a semi annual period? What would that lok like?

[kylecoolio12]

hello, out of interest, is this accounting? or university math?, thankyou

[arraso7]

I learn it in grade 9 or 10, not sure if it is considered accounting.

[MarylandJuly89]

This is interst theory math. It's not accounting , but is used for financing interest. Actuaries would use this type of math for their work. I'll admit it that this and accounting do seem some what the same.

[kylecoolio12]

thank you for your input, if you have any knowledge of annuities, do you know if that is embedded in accounting as well or where would you apply annuities in occupations associated with finance, thankyou

[MarylandJuly89]

I would give you an answer now, but I'll just do the smart thing and ask my professor tommorow. So tommorow I wil ask her what you just asked me... and i can give you the answer via youtube. While I'm at it, if you have any more questions, let me know so I can ask my professor tommorow.

[kylecoolio12]

ok, I am  currently studying finance and just want to make sure i have grasped the most important concepts, but as for questions, thats all for now, thankyou

[ajazaad]

hi , sir could u help in explaining how to graph the the function involving two or three variables

like counter graphs .

thanks

[Amybeth851]

Thanks again Patrick. We just covered this in my math class, but this made it more clear! Keep up the great work!

[TheDuskMar]

What is this?

Pe^rt

Principal times e to the rate times time power

[patrickJMT]

that is for CONTINUOUS compounding, not annual