Mathematics in the Financial Industry
The bank manager's office seems pretty fancy. You sit down on a vaguely comfortable-looking sofa, and the bank manager sits across from you in an office chair.
"I suppose I should get the formalities out of the way first. Hello there, pleased to meet you, we're a bank, we offer savings accounts, and those savings accounts pay compound interest that accrues on a monthly basis. In other words, every month, we deposit a little extra money into your account, in an amount equal to about point one percent of your current balance.
"Now, say you want to figure out how much your account will be worth after some number of years. You'll want to use this equation..." He pulls out a notepad and scribbles something down on it:
= (initial deposit) + (initial deposit) - (initial deposit) + (initial deposit) - (initial deposit) + (initial deposit) - (initial deposit) + (initial deposit) * (1 + interest rate per period)(# periods)
"Um, wait, no, I'm sorry. That's not it. What was I saying? It's been a long day today, and I'm really tired. Why are you here in my office?"