this is the binomial theorem of n power ,if the n is larger than 3 it's very tedious to multiply it out so there is the binomial theorem equation over there :
there is slightly faster way to calculate the binomial equation by Pascal triangle theorem .the coefficients of each a for n power and each b for n-k power is actually terms of Pascal Triangle (artbitrarily random ) the Pascal Triangle is symmetry there is even faster way to calculate each coefficents of a times b .
For Example :
=1a10+(1*10/1)a9b+(9*10/2)a8b2+(45*8/3)a7b3+....+b10
that's exactly for current coefficient :previous coefficient times the power of a divide by k (k=0 k<=n)
(p*na)/k is a formula of each coefficient with a for n-k powers times b for k powers
Later we'll talk about interest (interest rate or interest on you mortage) interest I don't know what it exactly mean but I just want to give you an intuitive way to understand what it is ,It's essentually rent on money.the money you pay in order to keep money for some period of time.That's probably not the most obvious definition .the finance terminology is just called principal :
And now it's necessary to explain what the simple interest and compound interest
simple interest means that the money you'll calculate ,which is the original amount.called principal
compound interest means that the money'll calculate ,which is the changable amount base on the last period of time you should pay him back called the principal
if the interest is ten persentage each year and you borrow 100 dollars from me and how much money I wll get after a decade
if the interest rate is 10%
simple interest compound interest
1y 100+100*0.1 100+100*0.1 p(1+r)
2y 100+100*0.2 (100+100*0.1)+(100+100*0.1)*0.1 p(1+r)(1+r)
3y 100+100*0.3 ((100+100*0.1)+(100+100*0.1)*0.1 )+ ((100+100*0.1)+(100+100*0.1)*0.1 )*0.1 p(1+r)(1+r)(1+r)
...
10y 100+100*1 p*(1+r)(1+r)....(1+r)
final money you should pay me back formula : for simple interest :m=p*(1+t*r) .for compound interest: m=p(1+r)^t
And why does e notation comes up in this field?how about that we are assuming that there is the the principal for 100 I lend you and for the 100% rate you should pay it back to me after a year
1y : 100+100*1
And while the period of time is decreased to a month ,then you the compound interest of a month is (100/12) ,after a year you should pay it back to me :
1y:100(1+100%/12)^12
and how about for a day as a period of time : the compound interest of a day is (100/365).After a year you should pay it back to me
1y: 100(1+100%/356)^356
if the period of time reach a trbillion second .that means the formula :m=p(1+1/n)^n if n is infinity .we will get e ,e is approximately 2.71....
we know if there is a compound interest r over there and there is an question ,how much you should pay it back to me for after n year;now we can assume that
the r is constant value so in the limitation we can ingnore it .so
because the r the constant so can get get the
so eventually I'll get 100*(e)^r for after n years .for n year and r compound interest we always get the formual is following to calculate it :
final money you pay = principal times e raise n times r powers.
f=pe^nr
and now there is a question .the final payment for after a decade is 500 dollars ,the principal is 50 dollars ,would you know the compound interest in this situation ?also we can construct the formula: ->
how can we figure out the r . we can use the logarithm log notation.
in general we always take log e notation as ln notation (important)
10r=ln 10 -> r=ln 10/10