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The reverse of compound interest what is it called?

  • 11-04-2006 3:38pm
    #1
    MorningStar
    Closed Accounts Posts: 3,031 ✭✭✭


    Been awhile since I have need lots of my maths but what is the reverse of compound interest.

    principle is €170k term 20 years X is rate and in the end you get €350k how do I workout X?
    Sorry for being a bit stupid these days


Comments

  • #2
    David19
    Registered Users, Registered Users 2 Posts: 925 ✭✭✭David19


    Compounded annually?

    The formula is A = P(1 + X)^t

    (A/P) = (1 + X)^t
    ln(A/P) = (t)(ln(1 + X))

    ln(1 + X) = (ln(A/P))/t

    Let (ln(A/P))/t = K

    X = (e^K) - 1

    Therefore with your numbers:

    X = (e^((ln(350/170))/20)) - 1
    X = 0.0368

    X x 100 = 3.68

    Therefore the rate is about 3.68%

    I think thats right anyway.


  • #3
    MorningStar
    Closed Accounts Posts: 3,031 ✭✭✭MorningStar


    Thanks for that the minute I saw it I remembered


  • #4
    TheBazman
    Registered Users, Registered Users 2 Posts: 6,462 ✭✭✭TheBazman


    The reverse of compounding is discounting


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