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Mathematics for Data Science with Python

bookChallenge: Predicting Savings Growth

Task

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A financial advisor wants to estimate how a client's savings grow over time when interest is compounded regularly. This type of growth follows a geometric progression, where the savings increase by a constant factor each compounding period.

The total savings can be calculated using the compound interest formula:

A=P(1+rn)ntA = P \left( 1 + \frac{r}{n} \right)^{n t}

Where:

  • A β€” final amount after all interest is applied;
  • P β€” initial deposit;
  • r β€” annual interest rate (as a decimal);
  • n β€” number of compounding periods per year;
  • t β€” time in years;

  1. Calculate the final savings amount after 20 years using:

    • Initial deposit: P=10000P = 10000.
    • Annual interest rate: r=0.08r = 0.08.
    • Monthly compounding: n=12n = 12.
    • Time period: t=20t = 20.
  2. Calculate the total interest earned by subtracting the initial deposit from the final amount.

Solution

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SectionΒ 2. ChapterΒ 6
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bookChallenge: Predicting Savings Growth

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Task

Swipe to start coding

A financial advisor wants to estimate how a client's savings grow over time when interest is compounded regularly. This type of growth follows a geometric progression, where the savings increase by a constant factor each compounding period.

The total savings can be calculated using the compound interest formula:

A=P(1+rn)ntA = P \left( 1 + \frac{r}{n} \right)^{n t}

Where:

  • A β€” final amount after all interest is applied;
  • P β€” initial deposit;
  • r β€” annual interest rate (as a decimal);
  • n β€” number of compounding periods per year;
  • t β€” time in years;

  1. Calculate the final savings amount after 20 years using:

    • Initial deposit: P=10000P = 10000.
    • Annual interest rate: r=0.08r = 0.08.
    • Monthly compounding: n=12n = 12.
    • Time period: t=20t = 20.
  2. Calculate the total interest earned by subtracting the initial deposit from the final amount.

Solution

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Everything was clear?

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Thanks for your feedback!

SectionΒ 2. ChapterΒ 6
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