Math Is Fun Forum

survival

Member

Registered: 2011-04-03

Posts: 655

Finance-Compound Interest

How much must a person save and invest in a compounded monthly interest account at 6% over a period of 10 yrs, to acquire the following down payments on houses.

house 1- down payment: $213,750.00

house 2- down payment: $64,750.00

house 3 down payment:  $5,475.00

I think if you had or knew Excel, then it might be easy to figure this out. I do not have that.

Thank you.
Edited to add, that the compound interest formula at the 6% is: P = A (1 + r/m)^-120.

Last edited by survival (2011-05-03 08:26:33)

gAr

Member

Registered: 2011-01-09

Posts: 3,482

Re: Finance-Compound Interest

Hi survival,

Using the formula from wikipedia,

Where,

A = final amount
P = principal amount (initial investment)
r = annual nominal interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years

---

"Believe nothing, no matter where you read it, or who said it, no matter if I have said it, unless it agrees with your own reason and your own common sense"  - Buddha?

"Data! Data! Data!" he cried impatiently. "I can't make bricks without clay."

survival

Member

Registered: 2011-04-03

Posts: 655

Re: Finance-Compound Interest

Thank you for replying, gAr.
I am working on this right now.
That's exactly what I needed. We are using the formula you used A = P (1 + r/m) ^n.

My instructor checks these figures with Excel and I had read that you knew Excel.
I now have to figure down payments of 3 cars, so if you check in please reply to this. It's all at 6% interest compounded using that same formula for 10 years (120.
Car 1 down payment: $18,235.00
Car 2 "                          1,084.75
Car 3"                              357.12

I am using a calculator for this. Please go through those 3 cars and see what you come up with. Appreciated and thank you!
Here is how I'm typing it into the calculator:
last car:
357.12(1 + .06/12) ^-120 =_____ (My instructor said to use the lower - sign on the calculator and not the regular - sign.)

Last edited by survival (2011-05-03 08:31:30)

survival

Member

Registered: 2011-04-03

Posts: 655

Re: Finance-Compound Interest

Bobby, tell gar to sign in soon. My numbers clash with his.
house 1- to get the dp over a period of 10 yrs using that formula:
$117,483.9968
house 2-$35588.71949
house 3- $3009.239235
I did not round yet.
The cars
car 1: I get different numbers on this one
car 2: $596.2141075
car  3: $357.1238 No rounding thus far (this thing is due in the morning)
All used by the formula       P = A (1 + .06/12)^-120 (that is the second minus sign on the T-184

bobbym

bumpkin

From: Bumpkinland

Registered: 2009-04-12

Posts: 109,606

Re: Finance-Compound Interest

Hi survival;

The question is a little confusing and easy to misinterpret.

If you want to know how much you have to invest to save that amount in 10 years you are correct. Your investment should be $117483.9968

You might want to round that to $117484

---

In mathematics, you don't understand things. You just get used to them.
If it ain't broke, fix it until it is.
Always satisfy the Prime Directive of getting the right answer above all else.

gAr

Member

Registered: 2011-01-09

Posts: 3,482

Re: Finance-Compound Interest

Hi survival,

Sorry, I didn't read the question properly. Your solution is correct.
The formula to be used was

Using the above formula for the cars:

---

"Believe nothing, no matter where you read it, or who said it, no matter if I have said it, unless it agrees with your own reason and your own common sense"  - Buddha?

"Data! Data! Data!" he cried impatiently. "I can't make bricks without clay."

survival

Member

Registered: 2011-04-03

Posts: 655

Re: Finance-Compound Interest

Hi survival;

The question is a little confusing and easy to misinterpret.

If you want to know how much you have to invest to save that amount in 10 years you are correct. Your investment should be $117483.9968

You might want to round that to $117484

Yes, it is all confusing at first. I am still learning.

bobbym

bumpkin

From: Bumpkinland

Registered: 2009-04-12

Posts: 109,606

Re: Finance-Compound Interest

Everybody is still learning. Mathematics is huge. There is always more. A lot more!

---

In mathematics, you don't understand things. You just get used to them.
If it ain't broke, fix it until it is.
Always satisfy the Prime Directive of getting the right answer above all else.

survival

Member

Registered: 2011-04-03

Posts: 655

Re: Finance-Compound Interest

Hey, just dropping by. I hope you are around in a bit, may have a few equations to work out. Guess it is getting closer to time for a vacation. May go home to dig in the creek, sure need a change of scenery. It was a stressful day, hope yours was a good one.

bobbym

bumpkin

From: Bumpkinland

Registered: 2009-04-12

Posts: 109,606

Re: Finance-Compound Interest

Around? I am always lurking around, sly and irresistible.

---

In mathematics, you don't understand things. You just get used to them.
If it ain't broke, fix it until it is.
Always satisfy the Prime Directive of getting the right answer above all else.