RyanJ Posted January 15, 2011 Share Posted January 15, 2011 Hi guys! It has been a while since I last posted and I've come with a problem. I know the formula for calculating the future value of a value with compound interest is: [latex]PV = \frac{FV}{\left( 1 + i \right)^n}[/latex] However. I need to figure out how much interest you'd need in order to reach a specific amount of interest per day. For example. I'd need to know how much money I'd need at, say, 7% interest rate per yet in order to get £10 a day interest. I've been unable to figure this out so any help here would be appreciated. This has been giving me a bit of a headache - it's for an excel project I'm working on. Link to comment Share on other sites More sharing options...
Bignose Posted January 16, 2011 Share Posted January 16, 2011 x*(1.07) = x + 10. Solve for x. Link to comment Share on other sites More sharing options...
RyanJ Posted January 16, 2011 Author Share Posted January 16, 2011 Sorry but that really doesn't make any sense at all to me. I came up with something like this last night - though it may not be correct: (interestWanted * daysInYear) / interestRate) Link to comment Share on other sites More sharing options...
Bignose Posted January 16, 2011 Share Posted January 16, 2011 x*(1.07) = x + 10. Solve for x. x is the original amount of money you want to put into an interest bearing account. You multiply x by 1.07 because you said that when compounding, you get 7% over the period. So, the amount that will be in the account after compounding is x*(1.07). You also said that you wanted to gain 10 pounds in the interest. Therefore the amount you want in the account is x + 10. You set these equal to each other, and solve for x, and you get how much you have to set aside initially in order to fit the conditions you stated. Link to comment Share on other sites More sharing options...
imatfaal Posted January 17, 2011 Share Posted January 17, 2011 (edited) I think the problem you are having is that you are not clear in your terms. You ask for £10 interest per DAY from 7% interest per YEAR. There are many different answers depending on your compounding period. 7% annual compound interest is not well defined (because apart from on an annual basis) because we cannot calculate the equivalent daily/monthly/etc rate. If we assume you get 7% per year and it is compounded monthly then the monthly rate to give that 7% is 0.5654% (1.07^1/12). Redo the calc that Bignose explained with this interest rate per month. By my reckoning you need 52-53K depending on whether it is simple or compound Edited January 17, 2011 by imatfaal Link to comment Share on other sites More sharing options...
TonyMcC Posted January 17, 2011 Share Posted January 17, 2011 Isn't the fact that with compound interest you don't get the same amount of interest every day at the heart of this problem? As time goes on the amount of interest per day should increase because you get interest on the interest you have accrued. Link to comment Share on other sites More sharing options...
michel123456 Posted January 17, 2011 Share Posted January 17, 2011 (edited) 52142,86£ Edited January 17, 2011 by michel123456 Link to comment Share on other sites More sharing options...
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