Compound Interest) If an amount a is invested at an interest rate r compounded n

Question

Compound Interest) If an amount a is invested at an interest rate r compounded n times per year, then the final value f at the end of one year is given by f = a(1 + r/n) n. This is the familiar formula for compound interest (so if we compound annually, then n = 1). Typically, compounding is done quarterly (n = 4), daily (n = 365) or continuously (n ??). In a class called CompoundInterest, write a method that implements the compound interest formula f above. This method should take the following parameters: a double a (as in the given formula), a double r (as in the given formula), and an int n (as in the given formula). This method should return the value of the investment at the end of a year (as specified by the formula f). You should NOT use any Math library functions or any imports (hint: you will need a loop). Test your method in main using an initial investment of $100.00, an interest rate of 5 percent (i.e. r = 0.05), and the following values for the compound number: 1, 4, 365, 1,000, and 10,000.

language: Java

Explanation / Answer

public class CompoundInterest {

      public static void main(String[] args) {

            // TODO Auto-generated method stub

            //Hard coding the values; you can use scanner function if you wish to get the values from user

            double principle = 100, rate = 0.05, years = 2, n=2;

            //Calling the compound function to calculate the total amount

        double amount = compound(principle,rate, years, n);

        //Printing out the results

        System.out.println("Compound Interest: "+(amount-principle));

        System.out.println("Total Amount: "+amount);

      }

      public static double compound(double principle, double rate, double years, double n){

            double amount = principle;

            //using for loop instead of math.pow function to calculate

            for(int i=0;i<(years*n); i++){

                  double w = amount * (1+rate/n);

                  amount = w;

            }

            return amount;

      }

}

Output:

Compound Interest: 10.38128906249996
Total Amount: 110.38128906249996

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