Simple Math - compounding question..

Discussion in 'Trading' started by Optional, Jan 6, 2010.

  1. the1

    the1

    Take your expected rate of return and convert it to a decimal so in the case of 10% convert to .10. Add 1 to that to give you 1.10. Now take that number and raise it to the power of n, which is the number of years (or periods if you want to choose weeks).

    For example, if you want to invest 10k for 5 years at 10% take 1.10^5, which equals 1.61051. Now multiply that by 10k to get $16,105.10.

    The equation is:

    Principal * (1+R)^n. Don't forget to convert R to a decimal.
     
    #11     Jan 6, 2010
  2. Jesus

    Jesus