Learning Python

Bigger Examples

Compounding Your Interest

Someday, most of us hope to put a little money away in a savings account (assuming those student loans ever go away). Banks hope you do too, so much so that they’ll pay you for the privilege of holding onto your money. In a typical savings account, your bank pays you i nterest on your principal. Moreover, they keep adding the percentage they pay you back to your total, so that your balance grows a little bit each year. The upshot is that you need to project on a year-by-year basis if you want to track the growth in your savings. This program, interest.py , is an easy way to do it in Python:

trace = 1  # print each year?

def calc(principal, interest, years):
    for y in range(years):
        principal = principal * (1.00 + (interest / 100.0))
        if trace: print y+1, '=> %.2f' % principal
    return principal

This function just loops through the number of years you pass in, accumulating the principal (your initial deposit plus all the interest added so far) for each year. It assumes that you’ll avoid the temptation to withdraw money. Now, suppose we have $65,000 to invest in a 5.5% interest yield account, and want to track how the principal will grow over 10 years. We import and call our compounding function passing in a starting principal, an interest rate, and the number of years we want to project:

% python
>>> from interest import calc
>>> calc(65000, 5.5, 10) 1 => 68575.00 2 => 72346.63 3 => 76325.69 4 => 80523.60 5 => 84952.40 6 => 89624.78 7 => 94554.15 8 ...