Compound Interest Calculation

kolag22

New member
Joined
Jun 25, 2020
Messages
2
Hi, I have a question regarding compound interest.
I have created compound table but also wanted to find a formula to work out an equation of what someone will need to make each year
on their investments to hit a certain target.

For example: If Peter had £137,000 in savings and wanted to have £800,000 at retirement in 28 years, how much interest will he need to make
on his starting amount each year. The profits/interest will be reinvested every year.

Does anyone know the formula to work this out?
 

Subhotosh Khan

Super Moderator
Staff member
Joined
Jun 18, 2007
Messages
21,305
Hi, I have a question regarding compound interest.
I have created compound table but also wanted to find a formula to work out an equation of what someone will need to make each year
on their investments to hit a certain target.

For example: If Peter had £137,000 in savings and wanted to have £800,000 at retirement in 28 years, how much interest will he need to make
on his starting amount each year. The profits/interest will be reinvested every year.

Does anyone know the formula to work this out?
Please show us what you have tried and exactly where you are stuck.

Please follow the rules of posting in this forum, as enunciated at:

https://www.freemathhelp.com/forum/threads/read-before-posting.109846/#post-486520

Please share your work/thoughts about this assignment.
 

JeffM

Elite Member
Joined
Sep 14, 2012
Messages
4,849
Hi, I have a question regarding compound interest.
I have created compound table but also wanted to find a formula to work out an equation of what someone will need to make each year
on their investments to hit a certain target.

For example: If Peter had £137,000 in savings and wanted to have £800,000 at retirement in 28 years, how much interest will he need to make
on his starting amount each year. The profits/interest will be reinvested every year.

Does anyone know the formula to work this out?
\(\displaystyle 137(1 + r)^{28} = 800 \implies (1 + r)^{28} = 800/137 \implies \\

1 + r = \sqrt[28]{800/137} \implies r = \sqrt[28]{800/137} - 1 \approx 0.065.\)
About 6.5% p. a. This assumes no taxes on the annual earnings. It is not a realistic model.
 

kolag22

New member
Joined
Jun 25, 2020
Messages
2
\(\displaystyle 137(1 + r)^{28} = 800 \implies (1 + r)^{28} = 800/137 \implies \\

1 + r = \sqrt[28]{800/137} \implies r = \sqrt[28]{800/137} - 1 \approx 0.065.\)
About 6.5% p. a. This assumes no taxes on the annual earnings. It is not a realistic model.
Thank you for this @JeffM .
I will be going through this to see if this resolves my issue.

Thanks again, appreciate your help.
 
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