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.