00:01
Suppose i've inherited $17 ,000 and i want to invest it in a savings account.
00:06
And i have a savings account that's going to give me 5 .6 % interest.
00:13
What formula could i use to compound monthly interest? so there is a formula.
00:24
And the amount is our principal, which is the starting amount that we have.
00:30
So 17 ,000 times one.
00:35
Now all one does is take 100 % of 17 ,000.
00:39
And then we're going to use our interest rate, but we need to change it to our decimal form, so 0 .056.
00:46
And we're going to take that divided by 12 because we're doing this monthly.
00:52
So the 12 reflects the months.
00:57
And we'll also have 12 up in our exponent.
01:00
So 12 times however many years we choose to keep this compounding monthly.
01:08
What if i want to keep my money in the account for four years, but i find out this.
01:12
They're going to compound this not monthly but daily.
01:17
I'm going to use a form of this formula still, but this time to calculate my amount after four years, i'm going to change my denominator and i'm going to change my exponent a little bit.
01:31
So i'll still have the 1.
01:33
I'll still have the 0 .056.
01:36
But instead of 12 months, i'm going to divide it by 365 days.
01:41
And in my exponent, i'm going to have 365 days times the number of years i'm going to keep it.
01:50
And i'm going to use my calculator.
01:52
I like to start here.
01:55
So i'll take 0 .056 divided by 365.
01:58
Then i'll add one to it.
02:00
Then i'll take it to this power.
02:03
Then i'll multiply it by 17 ,000.
02:07
And when you do that, you're going to get $21 ,267...