Compound Interest Without a Program

Description on calculating compound interest quickly without using a program.

2014District103

 

Annual interest rate is 3.5%.  Go ahead and think of it as 0.035 right away.

Compounded monthly, so we need to know the monthly rate.  Calculate = .002917

If you are adding .002917 of an amount to something, it's the same as multiplying by 1.002917 (if i add 10% to your grade it's the same as multiplying by 1.10)

So, you can think that you are multiplying your original loan by 1.002917 twenty-four times.

Rather than typing

we just type 2000 x 1.002917^24

Divide that by 24 months to get monthly payment amount.

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