Compound Interest and e (part 4)

[jnnycliff]

Imagine: ? x compound x Inflation x Fractional server x interest = American Fxxked.

[KiritaWindwalker]

I dont have the button for log on my calculator. Is there a different way to do it on a normal one? Or maybe to find by hand?

[Myrslokstok]

Well is it not beqause f(x)=e^x ger f'(x)=e^x that it is called natural. It is the natural base for diferetiation.

[jchien]

I have a permanent neuron for Pe^rt in my brain now thanks to Sal.

[reik2006]

so cool realizing the connection to differential equations y(t)'=ry(t) with the solution y=Ce^rt right here ... the principal C as the initial value at time t=0 and so on ;) ... so funny how all the stuff is interconnected .. so much fun :D

[Subutubiata]

He's left T out of the equation at 3.08.

[Subutubiata]

Okay. At 3.08 Sal gives the formula for calculating compound interest as: '1000 x e to the power of .75 x 3. In other words the principal multiplied by e raised to the power of the rate multiplied by the year (T).

But if you look at what he does on the spreadsheet he seems to omit the 3 (t). He's performing a compound interest calculation for period, with no time passed since the loan issue..., or what?.

[scorpion007]

Isn't it 100r %, not 10r %?

[samlocal88]

Hey Sal, does it work the same way when you're earning interest say on a savings acount? Or do they only compound your interst once a year? And how would that formula look like (to calculate your savings in time) Thanks!

[undercover9999]

@samlocal88 I haven't seen compounded interest rate (e based; t=max 12 or monthly) on loans. Regarding savings you can get monthly compounded interest (when you choose 1M deposit and renew it automatically). e based compounded interest is used only in finance calculations and some bond trades. This e based compounded interest in advanced finance calculation and it is used more in theory than in real life situations.

[realart1114]

This is so wonderful! I went through all of your compound interest videos and some of the logarithm videos you have - I learned from your videos what I couldn't learn from my online schooling. Their "lectures" (which are nothing more than written lectures) didn't teach much. Thank you for posting these!!!

[Surhotchaperchlorome]

A = Pe^(rt) if memory serves.

[purplefreak007]

31 years ago my mother gave my uncle $4000 for safekeeping. With compounded interest, what would that amount total today? Thanks!

[uburex97]

Have been teaching finance for ages but have no math background. Although I could glibly state that FV = Per^t I could never explain why in detail - UNTIL NOW - thanks! Still worth pointing out that although quants use exp function all the time, it never occurs in the real world. Interest is always quoted periodically.

[jomama1986]

e to the x is the natural number because it is the only number in which its derivative is the same value as its initial function. Thats why the natural log is called, the natural log function.

[marcellohro]

how can i interpetrate n in this formula:

P(1+r/n)^nt

[andyct1982]

Pe^rt

[andyct1982]

P(e)^rt something like that

[9iam]

you "divide" the year into n parts and at the end of each part compound interest is calculated

[mask0115]

amazing, good work , Thanks