Negative Fraction?

[MusicScoreMIDI]

i=c1-c0/c0
Hello. Could someone please explain to me how the formula for interest makes sense? The interest rate is supposed to be a positive decimal number but if c0 is larger than c1 which it has to be how can it not be negative? It needs to be used for c1=c0(1+i) and c0=(1/1+i)c1.
I'm only just starting to learn this.
Thanks.

 

[Deleted member 4993]

i=c1-c0/c0
Hello. Could someone please explain to me how the formula for interest makes sense? The interest rate is supposed to be a positive decimal number but if c0 is larger than c1 which it has to be how can it not be negative? It needs to be used for c1=c0(1+i) and c0=(1/1+i)c1.
I'm only just starting to learn this.
Thanks.

Why do you think so?

Can you please give some examples?

 

[HallsofIvy]

i=c1-c0/c0

This makes no sense because you haven't defined c1 and c0! Also what you wrote is i= c1- c0/c0= c1- 1. I doubt that is what you meant. If c0 is the initial amount of money in an account and c1 is the amount after a certain time, then c1- c0 is the total amount of interest that has accrued. (c1- c0)/c0 (note parentheses!) is the percentage increase. It will be the "annual interest rate" if the period is one year, the "monthly interest rate" if the period is one month, etc. In the United States, at least, you are required by law to state the annual interest rate in a prospectus for a savings account or other investment.

Hello. Could someone please explain to me how the formula for interest makes sense? The interest rate is supposed to be a positive decimal number but if c0 is larger than c1 which it has to be how can it not be negative?

It needs to be used for c1=c0(1+i) and c0=(1/1+i)c1.
I'm only just starting to learn this.
Thanks.

If, in fact, an account or investment draws interest then c1 cannot be less than c0! Some forms of investment can lose money and in that case we might think of it as a negative interest rate.

 

[MusicScoreMIDI]

This makes no sense because you haven't defined c1 and c0! Also what you wrote is i= c1- c0/c0= c1- 1.

It's very hard to write the examples that I gave because I can't write fractions with the horizontal lines but I just saw the icon for adding an image so I hope that helped. Is the first example the right formula for finding an interest rate? C0 is the original amount and c1-c0 is the amount of interest.

Thanks.

 

[Deleted member 4993]

View attachment 4216

It's very hard to write the examples that I gave because I can't write fractions with the horizontal lines but I just saw the icon for adding an image so I hope that helped. Is the first example the right formula for finding an interest rate? C0 is the original amount and c1-c0 is the amount of interest.

Thanks.

But ...

Why do you assume - c0 is larger than c1?

 

[MusicScoreMIDI]

But ...

Why do you assume - c0 is larger than c1?

You're right; I was misunderstanding it. I somehow thought that c1 was the amount added to C0.

Yes, it is simple. C1 is the new amount. The interest rate formula makes sense to me now.

Thanks very much for your answers.