future values/present values (compound interests)  TOPIC_SOLVED

Complex numbers, rational functions, logarithms, sequences and series, matrix operations, etc.

future values/present values (compound interests)

Postby looni on Fri Apr 04, 2014 7:20 am

1. Assuming a yearly interest rate of 6%, compounded monthly, what must the deposit be in 2015 to obtain a balance of $500,000 in 2025?

I assumed a=500,000(1+.06/12)^12(10)= $909,699
n=120
i=6%
pv=500,000
p/y=12
c/y=12
fv=909,699

but this girl in class had a different answer.
n=120
i=6%
fv=500,000
p/y=12
p/y=12
pv=274816.37
(i don't know how she got this. i did it on my calculator but i don't know which formula she used.)

2. In the above problem, instead of an initial deposit in 2015, contributions are made at the end of each month. To obtain the same nal balance of $500,000, what must the size of each contribution be?

i'm confused on this one. wouldn't it be a monthly compound too if she is making contributions at the end of each month? and i also do not know which formula to use for this problem.

please help. (;A;)
looni
 
Posts: 2
Joined: Fri Apr 04, 2014 5:57 am

Sponsor

Sponsor
 

Postby stapel_eliz on Fri Apr 04, 2014 7:05 pm

looni wrote:...what must the deposit be in 2015 to obtain a balance of $500,000 in 2025?

I assumed a=...
fv=909,699

Not knowing the variables in your formula, nor how they're defined, it is difficult to comment specifically. But it seems unlikely that one would need to deposit nearly a million dollars in order to have, after ten years of compound interest, only HALF a million dollars.

looni wrote:2. In the above problem, instead of an initial deposit in 2015, contributions are made at the end of each month. To obtain the same nal balance of $500,000, what must the size of each contribution be?

i'm confused on this one. wouldn't it be a monthly compound too if she is making contributions at the end of each month? and i also do not know which formula to use for this problem.

I don't know what a "nal balance" is, but you should probably use an annuity formula for this annuity problem. :wink:
User avatar
stapel_eliz
 
Posts: 1802
Joined: Mon Dec 08, 2008 4:22 pm

Re:  TOPIC_SOLVED

Postby looni on Sat Apr 05, 2014 3:18 am

stapel_eliz wrote:
looni wrote:...what must the deposit be in 2015 to obtain a balance of $500,000 in 2025?

I assumed a=...
fv=909,699

Not knowing the variables in your formula, nor how they're defined, it is difficult to comment specifically. But it seems unlikely that one would need to deposit nearly a million dollars in order to have, after ten years of compound interest, only HALF a million dollars.

looni wrote:2. In the above problem, instead of an initial deposit in 2015, contributions are made at the end of each month. To obtain the same nal balance of $500,000, what must the size of each contribution be?

i'm confused on this one. wouldn't it be a monthly compound too if she is making contributions at the end of each month? and i also do not know which formula to use for this problem.

I don't know what a "nal balance" is, but you should probably use an annuity formula for this annuity problem. :wink:


1) p=f/(1+i)^n
500,000/(1.005)^120= 274816.3667

2) d=f*i/(1+i)^n-1
500,000*.005(1.005)^120-1=3051.02

i think i got it thanks. ^^
looni
 
Posts: 2
Joined: Fri Apr 04, 2014 5:57 am


Return to Advanced Algebra ("pre-calculus")