Exponential Money Examples

Calculate the amount of a savings account after 10 years of savings that starts with $1500 and is compounded monthly at a rate of 5%.

P = 1500
r = 5% = 5/100 = 0.05
n = 12
t = 10

Substituting those values in:

That's a pretty good return, but you will need to put a lot more money in there at the start if you want it to give you a decent income.

How much will you pay for a car (in present value), if your payments are $225 for 36 months at an APR of 6%?

R = 225
r = 6% = 0.06
n = 12
t = 3

Substituting those values in the present value equation:

This can give you an idea of how much a car will cost overall. Too much!

How much mulah will you accumulate in a savings account if you start with $10000, the interest rate is 3%, the bank compounds daily, and you save for a lifetime of fifty years?

P = 10000
r = 3% = 3/100 = 0.03
n = 365
t = 50

Substituting those values in:

You could buy a car for your great-great grandchild...if the prices don't go up too much by then. Whoopie!