My friend, With a degree in finance from a prestigious midwestern business school, I am rather embarrassed to admit that... Prepayment penalties had not made immediate, intuitive sense to me. I knew that a lender would unexpectedly be forced to attempt to find a new borrower (which I had always understood, to a certain extent, to be a undesirable consequence of prepayment); however, in the example you've so generously taken the time to produce for the masses, you explain how the lender would permit a 6 month loan at half the 12mo interest rate with a caveat: should borrower then require the full 12 months... Lender would permit REBORROWING at the same 6mo rate. At this, the lights finally turned fully on and my brain lit up... finally, after all these years getting it! And I owe it all to the Khan academy for these amazingly brilliant yet simple instructional videos! Thank you, Sal. Thank you so much.
He said, it's basically like this: (1.085 + (.085*1.085)). So if you factor out the 1.085 it looks like: (1.085)(1 + .085). Simplify that and it's (1.085)(1.085), which is (1.085)^2. This continues as each month passes and the exponent changes.
Here's his updated video: www.khanacademy.org/math/algebra2/exponential-and-logarithmic-functions/e-and-the-natural-logarithm/v/e-through-compound-interest This makes more sense.
@jeepnypitpits He got the example problem mixed up. If you borrow at half the rate (50%) for half as long, you'd get 1.25, given you only compound interest once. I haven't seen the video with exponents, logs, ln, and e yet, gonna have to check it out. I recommend you do the same. Cheers
I am doing an assignment on compound interest in math, and I have to answer this question: What is the theory? What does it state? (Postulates, fundamental concepts, etc…). Any ideas on how I could answer both of these?
wow, glad I only borrowed ONE dollar! ;) and by the way what time period is semi-annually considered? If its 2 that you would divide the interest rate with, is that in months? Because wouldn't a year be 12?
HELP!!! a car was bought for 25000$, each year it depreciates by 15%... a) write an exponential formula that demostrates the cars value in (n) amount of years after it was purchased/ b) what is the cars value at the end of 3 years c) after how many years will the value of the car be half of the original price? PLZ HELP!!!! THANK YOU!!!
@jeepnypitpits It is wrong because you use a calculator for such an easy task. Even if you had very little knowledge of Maths you would know that 1+50% = 1$+(50% or 0.5 or 1\2 of 1)$ = 1$+0.5$ = 1$+0.50$ = 1.50$
"Find the interest rate (in % p.a.) compounded monthly necessary for $ 20000 to accrue to $ 25000 in 2 ½ years." can any one just tell me how to solve this my mind is fucked
Hi guys, I have a question. Let's say that the Principal is $20 at rate 10% compound interest over 6 months. Correct me if I'm wrong: $20(1+0.10/6)^6^(1) --> 22.0852../6 = 3.68.... interest per month?? am I right?
$20 for 1 year at interest gets $22 does it make sense getting $22.0852... for 6 months, but $22 for 1 year. for 12 months $22.094... these are the formulas that I used: 20*(1+0.1)^1 and 20*(1+0.1/12)^12^1, please someone throw some light on the matter :)
Hopefully, don't spam but I think I got it, why there is a difference. In the first example it is compound only once 20*(1+0.1)^1 , but in the second example interest is compounded every month (12 months) 20*(1+0.1/12)^12^1 and that is why the total amount is larger? From what I can tell from a lender's point of view it is better the interest to be compounded every month rather than once a year.
So... I spent 10 minutes and 11 seconds of my life watching stuff I already know, with the belief that I was to be introduced to the number e in this video, only for it to end without any mention of e? Why is it even in the title?!
*girlynathalie.xo1* Algebra is not difficult. However, his delivery and presentation aren't optimal. That said, you do need the desire and willingness to put in the necessary effort to learn anything.
