Chap. III. CALCULATION' OF INTEUEST.

1 103
ponent minus l,that is, by
^,
we have the sum required,
=20(|J)"i

20t. Wherefore the
principal sought is
(|J)"a
+
20(|l)"i-20i =
(|^)"
x (a + 20b)-'J0h.
To resolve this formula we must separately calculate its first term
(|l)"
x (a + 2Gb),
which is 7jL.
21
+ L.(a + 20b), for the number which answers to this logarithm in the tables
will be the first term, and if from this we subtract 206 we have the principal sought.
Suppose a principal of 1000/. placed out at 5 per cent, compound interest, and to it
tliere be annually added 100/. besides its compound interest, and it be required to know to
what it will amount at the end of 25 years. Here a
=
1000, b100, n=25' and the
operation is as follows :

L.?i =0-0211
89299
Multiply by 25 we have 25
L.?l
= 0-5297324750
L.(a + 206)
= 3-4771 21 31 35
= 4-0068537885
Tlie first part or number which answers to this logarithm is 10159-1/.
;
from which if we
subtract 206 = 2000 we find the principal in question to be after 25 years 8159-1/.
If it be required to know in how many years a principal of 1000/. under the above
conditions would amount to 1,000,000/. ;
let n be the number of years required, and since
a
=
1000, 6 =
100, the principal at the end of w years will be
(|i)"
(3000)

2000, which sum

must make 1 ,000,000/. ;
whence results this equation :

3000
(Vt)"-
2000 =
1 000000
Adding to both sides 2000 we have 3000
(3X)
"=1002000
Dividing both sides by 3000 we have
(5^)
=334
LTsing logarithms we have nL.|^ =
L.334, and dividing by
L.^i,
we obtain n= ^^. Now
L. 334 =2-5237465 and L.
2'
=0-021
1893,
wherefore n=
Q-^gUSOS-
^^' 'a'^tly, the two terms
of this fraction be multiplied by 10000000, we shall have 71 =
9^1^33^'
equal to one hun-
dred and nineteen years one month and seven days, which is the time wherein the prin-
cipal of 1000/. will be increased to 1,000,000/. In the case of an annual decrease in-
stead of increase of the capital by a certan sum, we shall have the following gradations as
the values of o, year after year, the interest being at 5 per cent., and, representing by 6 the
sum annually abstracted from the principal,
After 1 year it would be
|in
6
After 2
years

(i^)"'^"!^^"^
. After
3
years

Qhy<^-iVif'>-W'-^
After n years

(i)a -iV^T'^b
-
(|^)"--6
(|i
)6
_
/,.
This principal evidentlyconsists of two parts, one whereof is
(Hi)"i
and the other to be sub-
tracted therefrom, taking the terms inversely, forms a geometrical progression, as follows ;

i>+my>+(^f'+(W'^+ (U)"~'b
The sum of this progression has already been found = 20
(|^)"6

206
; if, therefore, this
be subtracted from ('^^^"a, we have the principal required after n years
=(|i)"(
20/^) + 206.
For a less period than a year, the exponent n becomes a fraction
; for example, 1 day
=
15!,,
2 days
=
3I3,
and so on. It often happens that we wish to know the i)resent value of
R
sum of money payable at the end of a number of years. Thus, as 20 i)oiinds in ready
money amount in a twelvemonth to 21 pounds, so, reciprocally, 21 pounds payable at the
end of a year can be worth only 20 pounds. Therefore, if be a sum payable at the end
of a year, the present value of it is ^a. Hence, to find the present value of a principal a
at the end of a year, we must multiply by
|^
;
to find its present value at the end of two
years, it must be
multiplied Jjy (2^)'-a; and, in general, its value 11 years before the time of
payment will be expressed by ('^)"a-
Thus, suppose a rent of 100?. receivable for 5 years, reckoning interest at 5 per
cent, if we would know its value in present money, we have
For
i?100
due after 1 year, the present value is
i,
95-239
after 2 years 90-704
after 3 years 86-385
after 4 years 82-272
after 5 years 78-355
Sum of the five terms 4.32-9.55
So that In present money, the value is 432/. 1 9s. Id.
But for a great number of years such a calculation would become labor'ous. It
may be facilitated as follows:

Let the annua! rent = a, commencing tlirectlj and con-