I need to find a formula for the compound interest rate i equivalent to a discount rate of d, if the money is discounted over n years. I know that i=d/(1-d), but not how the no. of years comes into it, or how i=d/(1-d) is derived. I'm sure the information is on the internet somewhere- so sorry for asking here- but I'm finding it quite confusing and if someone could give me any help that would be great. Thanks.

  • $\begingroup$ Hey Amy what´s up ? $\endgroup$ – callculus Feb 17 '17 at 11:24

If you substract $d$ percentage from $x$ you have to calculate $(1-d)x$. Now you can ask yourself for what value of $i$ it is the same value if you discount $x$ one time ?

You get the equation:


x is cancelling out


Taking the reciprocal on both sides






If $d=0.2$ then $i=0.25$


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.