Calculate Interest: Investment with Simple Interest and Days

Have you ever wondered how to transform a handful of lines of code into a time machine for your finances? ⏳

🔮 Problem Statement

Juan, an investment enthusiast, needs a quick and accurate way to estimate the return on his capital in different scenarios. He wants to predict how much his money (money) will grow after a certain number of days (days), given an annualized interest rate (i).

Specifically, he needs a function called investment_by_days that accepts the following parameters:

• money: The initial capital to invest (type float).
• i: The annualized interest rate (type float).
• days: The number of days the investment lasts (type int).

The function should return the investment at the end of the term, rounded to two decimal places. It is essential to consider a commercial year of 360 days and that the interest rate provided is annualized.

Here are some examples that illustrate its operation:

investment_by_days(10000, 0.08, 7)  # Should return 15.56
investment_by_days(2000, 0.03, 30)   # Should return 5.0
investment_by_days(1000, 0.05, 90)   # Should return 12.5

🧩 Step-by-Step Solution

The key to solving this problem lies in understanding how to adapt an annual interest rate to a shorter period of time. Imagine that the annual rate is like a whole cake, but we only want a slice corresponding to the days of the investment. 🍰

def investment_by_days(money, i, days):

First, we define the investment_by_days function that takes the initial capital (money), the annualized interest rate (i), and the number of days (days) as input. This function will act as our financial oracle.

    return round(money * i * days / 360, 2)

Here is where the magic happens. We multiply the initial capital by the annualized interest rate and the number of days. We divide the result by 360 (days in a commercial year) to adjust the interest rate to the specific duration of the investment. Then, we round the result to two decimal places using the round() function, ensuring the required precision. This last step is crucial to present a clean and easy-to-interpret result.

Complete Solution:

def investment_by_days(money, i, days):
	"level: medium; points: 4"
	return round(money * i * days / 360, 2)

🧠 Key Concepts

Simple interest is at the heart of this calculation. Unlike compound interest, simple interest is calculated only on the initial capital, without considering previously accrued interest. The annualized interest rate represents the cost or return of capital during a one-year period, expressed as a percentage. A commercial year of 360 days simplifies financial calculations, assuming 30 days per month. Decimal precision is fundamental to accurately represent monetary amounts, avoiding significant errors in estimates.

Did you know that the use of a commercial year of 360 days, instead of the actual calendar year of 365 or 366 days, dates back to ancient banking practice, where it simplified manual calculations before the advent of computers? 🤯

💫 Final Thoughts

A possible improvement would be to consider the possibility of incorporating compound interest into the function. Also, we could add input validations to ensure that the parameters money, i, and days are valid values (for example, that money is positive and days is not negative). For more advanced use, a function could be implemented that allows the user to choose between a commercial year and a calendar year.

We hope this journey through the world of code and finance has been useful to you! If you are passionate about the idea of turning algorithms into financial or any other kind of tools, do not hesitate to explore more articles on our blog! Software development is full of possibilities to transform ideas into reality. Until next time! 👋