While Loop Example (Compound Interest)

Back to: Python Programming

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Calculating the interest earned or paid on an investment or loan requires some user data and a formula.  We can use Python to do the calculations.

The Compound Interest Formula:

For this exercise we’ll need to ask the user to enter the:

• principal (P) amount they want to invest
• what the interest rate (r – as a decimal) is
• how often we’ll be compounding (n – if compounding daily, n is 365)
• the number of years (t).

These numbers are put into the formula to find:

• amount in the bank at the end of the time.

How would we extend this to find the Interest earned (I)?

Solution:

# Python Compound Interest Calculator
# By Mr. Dickinson
# Ver: 1.0

# Declare the four variables
principle = 0
rate = 0
compounding_period = 365 # <-- Assumes daily
time = 0

# For Input Validation we use a While Loop
# The While Loop prompts user to enter a (+)ve number
while principle <= 0:
    principle = float(input("Enter the amount to invest: "))
    if principle <= 0:
        print("Principal must be greater than zero!")

# Use a While Loop to prompt user to enter a (+)ve number
while rate <= 0:
    rate = float(input("Enter the interest rate: "))
    if rate <= 0:
        print("Rate must be a positive number!")

# Use a While Loop to prompt user to enter a (+)ve number
while time <= 0:
    time = float(input("Enter investment time in years: "))
    if time <= 0:
        print("Time must be greater than zero!")

#total = principle * pow(1 + rate/(100*compounding_period), (compounding_period * time))
total = principle * ((1 + rate/(100*compounding_period)) ** (compounding_period * time))

print(f"Your balance after {time} years compounded daily at")
print(f"an interest rate of {rate}% will be ${total:.2f}")

Note in the calculation, we can bring one value to the power of another using multiple techniques:

x = y^z

• x = pow(y, z)  or
• x = y ** z

Basic: Extend this code to specify the amount of interest earned at the end of the period.

Advanced: Extend the code to allow the user to specify if the investment is compounded daily (365), weekly (52), monthly (12) or annually (1).

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