Question

Write an improved version of the futval.py program from Chapter 2. Your program will prompt the user for the amount of the investment, the annualized interest rate, and the number of years of the investment. The program will then output a nicely formatted table that tracks the value of the investment year by year. Your output might look something like this: $$\begin{array}{cc} \text { Year } & \text { Value } \\ \hline 0 & \$ 2000.00 \\ 1 & \$ 2200.00 \\ 2 & \$ 2420.00 \\ 3 & \$ 2662.00 \\ 4 & \$ 2928.20 \\ 5 & \$ 3221.02 \\ 6 & \$ 3542.12 \\ 7 & \$ 3897.43 \end{array}$$

Short answer

The program prints an investment growth table by calculating the year-end value for each year using the formula: Value = Value * (1 + interest_rate), applying consistent formatting.

Step-by-step solution

Gather Inputs

Prompt the user to enter the investment amount, annualized interest rate, and the number of years for the investment. Store these values in appropriate variables.

Initialize Variables

Create a variable for the current value of the investment and set it equal to the initial investment amount. Also, create a list to hold year-by-year investment values.

Create Header for Output Table

Print out the header of the table with the column names 'Year' and 'Value' using a nicely formatted string.

Compute and Track Annual Values

Use a loop to iterate through each year, calculating the value of the investment at the end of each year using the formula:\[ \text{Value} = \text{Value} \times (1 + \text{interest rate}) \]Store the calculated values in the list for later use and simultaneously print each year's results with proper formatting.

Implement Formatting Rules

Ensure the printed output maintains consistent formatting by using functions and methods that handle strings, numbers, and currency values appropriately. This can involve setting decimal places or aligning columns.

Key concepts

Investment Calculation

Investment calculations revolve around determining how much your initial amount of money, known as the principal, will grow over a specified period. This includes both stable additions from deposits and the gains from interest. In programming, especially when using Python, you can model this growth with simple loops and multiplication.
Suppose you begin with an investment of $2000, and you want to see how it develops year by year given a certain interest rate. You'd first prompt the user to input this initial investment amount along with the expected annual interest rate and the duration of the investment in years.

• **Initialize**: Start with your principal (initial amount) stored in a variable.
• **Compute**: For each year, calculate the new value of the investment using the formula \[ \text{Value} = \text{Value} \times (1 + \text{interest rate}) \]
• **Track**: Maintain a list of these values to display growth over time.
• **Output**: Display a table that highlights how your money grows.

This method of calculation is simple but powerful, clearly showing how compound interest can significantly increase your investment over time.

Annual Interest Rate

An annual interest rate is a percentage that represents how much a bank or financial institution pays you for your money or charges you for borrowing. It's usually expressed on an annual basis, as a yearly rate.
The formula \[ \text{Value} = \text{Value} \times (1 + \text{interest rate}) \]uses the annual interest rate to determine how much your investment grows every year. Interest can be simple or compound, but in our exercise, we're focusing on the concept of compound interest.
Compound interest means that you earn interest not only on your initial investment but also on the accumulated interest from previous periods. This leads to exponential growth, which is why even a small, steady interest rate can lead to substantial gains over many years.
Understanding annual interest rates:

• **Nominal Rate**: The stated interest rate without taking inflation or other fees into account.
• **Effective Rate**: The actual interest you earn or pay due to compounding.

When dealing with investments, knowing how to apply the annual interest rate to predict future investment values is crucial for financial planning.

Learning Programming

Learning programming, particularly with Python, opens a world of opportunities to solve real-world problems through code. Python is known for its readability and user-friendly syntax, making it a suitable choice for beginners interested in investment calculation or similar projects.
When programmed well, tools like the one from our exercise can automate repetitive tasks, save time, and provide insights that manual calculations cannot. Here are some reasons why learning programming through Python could be beneficial:

• **Versatility**: Python is used in various fields, from web development to data science and AI.
• **Community Support**: Being overly popular, it has a vast support network, tutorials, and libraries to facilitate almost any task.
• **Simplicity**: With Python, you can focus more on learning algorithms and problem-solving rather than getting bogged down by complex syntax.

Whether you're interested in automating calculations or developing more complex financial models, learning programming through Python equips you with the necessary skills and knowledge to do so effectively.