Interest Problem

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K_Swiss

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Feb 8, 2008
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Please help me with the following problem. I'm not able to get the right answer! Please provide a full solution that I can follow... thank you.

How much money should be invested now at 7% to obtain $9,000 in 5 years if interest is compounded:

a) Quarterly
b) Continuously

------------

My work:

a)
B = 9000(1 + (0.07/4)^20
B = 12 733

b)
B(5) = 9000e^0.07
B(5) = 0652.57

------------

Textbook answer:
a) $6 361.42
b) $6 342.19
 
K_Swiss said:
Please help me with the following problem. I'm not able to get the right answer! Please provide a full solution that I can follow... thank you.

How much money should be invested now at 7% to obtain $9,000 in 5 years if interest is compounded:

a) Quarterly
b) Continuously

------------

My work:

a)
B = 9000(1 + (0.07/4)^20
B = 12 733

b)
B(5) = 9000e^0.07
B(5) = 0652.57

------------

Textbook answer:
a) $6 361.42
b) $6 342.19
Click to expand...

The key word in your problem is -- obtain.

That means, according to your equation B = 9000.

The unknown variable should replace "9000" in your equation. That is:

a)

9000 = P (1 + (0.07)/4)^20

\(\displaystyle P \, = \, \frac{9000}{1.0175^{20}}\)
 
In part b) , you use e^.07; that's not correct: should be e^(.07 * 5)
 
K_Swiss said:
… provide a full solution that I can follow …
Click to expand...


Do you understand the process of earning interest on money in the bank?

Please tell me whether or not you know the difference between the following terms.

Balance

Principle

Interest

It appears to me that you've got them mixed up.

If you do not understand the relationship between these three terms, then there is no point in trying to do these two exercises.

 
Re:

mmm4444bot said:
Please tell me whether or not you know the difference between the following terms.
Balance
Principle
Interest
Click to expand...
YES, I do:
Balance: what you weigh yourself on
Principle: the school master
Interest: looking at a certain page in Playboy

THERE :idea:
 
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