## future values/present values (compound interests)

Complex numbers, rational functions, logarithms, sequences and series, matrix operations, etc.
looni
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Joined: Fri Apr 04, 2014 5:57 am
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### future values/present values (compound interests)

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

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.

stapel_eliz
Posts: 1628
Joined: Mon Dec 08, 2008 4:22 pm
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...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.
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.

looni
Posts: 2
Joined: Fri Apr 04, 2014 5:57 am
Contact:

### Re:

...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.
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.
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. ^^