Here's the question you clicked on:

55 members online
  • 0 replying
  • 0 viewing

chrissytt17

  • 4 years ago

a person wishes to invest M dollars at t eh end of each month from January 2000 until the end of December 2003. If the account gives interest at the annual rate of 18% compounded monthly and the individual wishes to have $100,000 by the end of 2003, how much should be invested each month?

  • This Question is Closed
  1. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    No i don't

  2. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    it is \[A=P\times{(1+r)^{n}}\] where A = Amount P = Principal r = Rate of interest n = number of time period

  3. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    ok now tell me for how many moths you will be investing??

  4. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    so for 3 years that's 36 months

  5. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    you started investing from Jan 200 - Dec 2003 right it is 36 months

  6. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    A=100,000x(1+18%)^36

  7. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    a=100,000 (19)^36

  8. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    so here n = 3yrs = 36 months r = 18% per annum but this will get compounded monthly so it cannot be 18%

  9. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    can i leave it in the annual form and just do A=100,000x(19)^3 ?

  10. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    so your formula will change right the formula that i had given u is the general formula now when it is compounded monthly in that case the formula would be \[A = P\times{(1+{{r}\over{12}})^{12n}}\]

  11. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    @chrissytt17 here principal is unknown

  12. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    are you getting my point?

  13. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    i thought the principal is the amount that the individual wants

  14. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    no what you want that you will get at what time????

  15. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    the individual wishes to have $100,000 by the end of 2003, how much should be invested each month?

  16. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    100,000=Px(1+r/12)^12n

  17. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    where r = 18% but when you are plugging in the value of r that time convert it into decimal so r = 0.18

  18. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    100,000= P x (1+.18/12)^12*3 ?

  19. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    100,000= P x (1.015)^36

  20. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    am i on the right track?

  21. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    wait let me cross check it

  22. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    i came up with about 58,513.75

  23. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    no it is not correct

  24. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    I followed the formula

  25. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    I think I am lost

  26. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    hey i was not telling you about the Annuity do you know about it?

  27. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    no

  28. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    you are in which class

  29. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    math 118

  30. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    ok do you know about time value of money

  31. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    I'm not sure

  32. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    \[100000 = P \times \sum_{n=1}^{36}(1.015)^n\]\]

  33. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    ok solve this one you will get the exact value

  34. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    the second factor on RHS is called as Present Value Interest Factor of Annuity

  35. chrissytt17
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    I don't know what that symbol is

  36. sheg
    • 4 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    it is summation

  37. Not the answer you are looking for?
    Search for more explanations.

    • Attachments:

Ask your own question

Sign Up
Find more explanations on OpenStudy
Privacy Policy