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#1 2013-02-20 07:40:47

vatso
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Time Value of Money

1) What is the accumulated value of $150 invested for three years and three months when the rate of interest is 0.5% per month? The right answer is $182.21. How to you get to that figure?

2) $100 invested for two years at an interest rate of 2% per quarter. What is the difference between the compound and simple interest earned on this investment? The correct answer is $1.17. How you get this value?

3) What is the future value of 100 invested at 1% per month for five years? The correct answer is $181.67. How do you get that value?
Again, thank you in advance!!!!

#2 2013-02-20 14:12:02

bobbym
Administrator

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Re: Time Value of Money

Hi vatso;

Simplest way is to form the recurrence



with a(0) = 150. Then you just run the recurrence forward for 39 months. Answer is 182.20809 which when rounded is 182.21

From the recurrence you can also get a formula:




Question 3) is done the same way.

Last edited by bobbym (2013-02-20 14:34:31)


In mathematics, you don't understand things. You just get used to them.
I have the result, but I do not yet know how to get it.
All physicists, and a good many quite respectable mathematicians are contemptuous about proof.

#3 2013-02-21 00:38:59

vatso
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Re: Time Value of Money

Thank you Bobbym!!!!!! Really appreciated it!!!

#4 2013-02-21 00:53:19

bobbym
Administrator

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Re: Time Value of Money

Hi vatso;

You are welcome and welcome to the forum.


In mathematics, you don't understand things. You just get used to them.
I have the result, but I do not yet know how to get it.
All physicists, and a good many quite respectable mathematicians are contemptuous about proof.

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