Categories
Python for Financial Mathematics

Simple Interest

The concept of Simple Interest is one of the first things anyone learns in Financial Mathematics.

It isn’t really hard to program.

The formula I am using is given below:

Simple Interest Formula

The code to program this is shown below:

# Print out the purpose of the program
print("This program computes the compound amount using simple interest")
print("Reference: An Undergraduate Introduction to Financial Mathematics (Page 2)\n")

# Ask the user for the initial deposit
principal = float(input("Please enter the initial deposit: "))

# Ask the user for the rate as a percentage
rate = float(input("Please enter the rate: "))

# Ask the user for the number of years
years = float(input("Please enter the number of years: "))

# Compute the compounded amount
rate = rate / 100
compounded_amount = principal * ((1 + rate)**years)
print("\nThe compounded amount is:", round(compounded_amount, 2))

You can also find the code on GitHub.

Categories
Python for Financial Mathematics

Compound Amount using Monthly Compounding

Introduction

I live in Lagos, Nigeria the poverty capital of the world.

This year, I decided to study Financial Mathematics.

I am an Engineer with a BSc in Systems Engineering from the University of Lagos.

My decision to study Financial Mathematics stems from the knowledge that to solve a problem, I must thoroughly understand it.

Programming with Python

Whilst reading the book An Undergraduate Introduction to Financial Mathematics I realized that the formulas where jumping over my head.

Besides, its been a long time since I have done any Mathematics.

So I decided to write the compounding formula as a program. You can find the program below:

# Print out the purpose of the program
print("This program computes the compound amount using monthly compounding")
print("Reference: An Undergraduate Introduction to Financial Mathematics (Page 3)\n")

# Ask the user for the principal amount
principal = float(input("Please enter the principal amount: "))

# Ask the user for the rate as a percentage
rate = float(input("Please enter the rate: "))

# Ask the user for the number of years as a decimal value
years = float(input("Please enter the number of years as a decimal value: "))

# Compute the compound amount (Page 3)
r_n = rate / (12 * 100)
nt = years * 12
factor = (1 + r_n) ** nt
compound_amount = principal * factor
print("\nThe compound amount is:", round(compound_amount, 2))

In doing so, I have a ready made program that I can use to solve the exercises in the book without having to use a calculator.

Conclusion

The essence of code is to replace human rigour and tedium.

In creating this program, I had to study the formula and come up with my own program.

Now I understand the formula.

You can also find it on GitHub.