leftimage for poohprod.ru

Effective Interest Rate on Investments - Calculation

1.- Explanation of concepts and code in Matlab

2.- Examples

3.- Video

4.- Online Calculator (another page within this site)

1.- Explanation of concepts and code in Matlab


This code calculates the effective interest rate for a known initial investment which amounts to a known future value in a specified period of time. This rate expresses the actual rate of interest earned annually on the investment.


The effective interest rate is calculated by the following formula:

effective interest rate formula

where:
T = future value
P = initial investment
Y = years

You may calculate the effective interest rate on amounts you have already invested and accrued interest. Or you may calculate the effective interest rate necessary to enable a principal to reach a hypotetical value in a specified amount of time. For example, if you invest $5000 in a bank and wish $6800 after six years, you will predict the effective interest rate the bank must pay in order to achieve this.

The effective rate may also be used to calculate the effective percent of depreciation of an investment. A negative rate shows actual depreciation.

This is our simple Matlab code to calculate the formula above:

function eir = effective_interest_rate(p, t, y)
eir = ((t/p)^(1/y)-1)*100;

We create another script to test and drive the above m-file:

clc; clear; format bank

p = input('Enter initial investment: ');
t = input(
'Enter total value after y years: ');
y = input(
'Enter number of years: ');

eir = effective_interest_rate(p, t, y)

Example 1:


Jane deposits $945 in a bank. Four and a half years later her account has $1309.79. What actual percent of her initial investment did the bank pay annually?

Enter initial investment: 945
Enter total value after y years: 1309.79
Enter number of years: 4.5

The result is:

eir = 7.52

Example 2:



Richie bought a car in 1990 for $7534.84 and sold it in 1993 for $3555.00. What was its effective rate of depreciation?

Enter initial investment: 7534.84
Enter total value after y years: 3555
Enter number of years: 3

The result is:

eir = -22.15

3.- Video on Interest Rates



From 'Effective Interest Rate' to home

From 'Effective Interest Rate' to 'Finance Formulas'

Top

Interest calculator online


Calculate annuity

Calculate future value

Bank widthdrawal

Initial investments

Nominal interest rate




footer for effective interest rate page




































































Related pages


binary decimal numbersroots and zeroscurve fitting toolboxfminsearch in matlabtaylor expansion of cosinehow to calculate permutation5th order polynomialformula for sum of harmonic seriesascii char valuespythagorean therom calculator4 band resistor colour codeconversion of decimal to binary examplesbinomial distribution solved problemssmith chart exampleslearn matlab programmingsalvage value formulahow to loop in matlabdemorgans lawsmatlab code bisection methodmatlab bookmatlab plotsmatlab continuehow to find the salvage valuedec to binary converterintegrate using matlabsummation in matlabdouble integral matlabbinary to decimal numberscramers rule examplessimultaneous equations matlabhistogram on matlabmatlab matrix inversionsmith chart calculatorcurve fit tool matlabhow to calculate a factorialfminbnd matlabshading matlab2d interpolation matlabcode for pascal triangleascii to binary charthow to decode ascii codehow to convert a binary to decimalmatlab tutorials for beginnerssolve factorialspolynomial fitting matlabbest matlab bookmatlab solve linear systempeak fitting matlabloops in matlabmatlab histogram exampledraw vertical line matlabalgorithm for pascal trianglebissection methodsolve equation with matlabstudent distribution calculatorascii char tabletrapezoidal rule in matlabpiecewise graphbinary to hex conversion methodsemilogx matlaboctal tablefactorial calculation formulastring in matlabhexadecimal to decimal conversion tablematlab inverse of a matrixboolean operators meaningsine taylor seriescool matlab codesmatlab exponential curve fitmatrices gauss jordanfind the prime factorization of 49plotting polynomials in matlab