financial maths question ;D

[nathan26199]

hey there, iv looked around the forums but no questions are the same im stuck with
my first post haha .

i tried to do it, substituted different numbers but i cant seem to get it right, well the text book answer anyway.
i was using A=(m(1+r)^n-1)/r

everyone in class seems to be having problems with this so hopefully i get the edge by posting here ;D

Calculate the future value if $300 Is invested monthly at 6% p.a., paid quarterly for 5 years.

correct answer is $20915.01

thank you all!

 

[nathan26199]

OMG THANK YOU!!!

this is amazing how did you figure it out?

it all makes sense now though,, OMG I'M TOO EXCITED FOR A MATHS QUESTIONS LOL

edit: excitement gone away , i got happy without actually working it out.

so i just tried to find r
(1+r)^12=(1+0.061365355/4)^4

i worked that out to be: r= 0.0050877

but when i substitute that in for the actual equation i get 20800 and something

a=300[(1+r)^60-1/r]


p.s i understand that we need the rate to be compounded 1/4ly however whats the (6.14%)
and why are we compounding 12 times? there are 20 quarters in 5 years? so shouldnt it be 20?
so therefor my question is what lead you to (1 + r)^12 = (1 + .06/4)^4

thanks again for all the help

 

[nathan26199]

oh i see now!
thanks a lot denis ( coincidently my maths teachers name )

i think i understand now but i would never have thought to use (1 + r)^12 = (1 + .06/4)^4

but i still dont understand why we use 12?

the question clearly states : paid quarterly so wouldn't it make sense that interest is calculated every 3 months

and using 12 means -- after i work it out for 12, i get the interest that is used for compouding for a year, then using equations i work it out for months
then times by 60 months??

p.s and is it really necessary to figure out
The rate to be achieved is 6% annual compounded quarterly:
(1 + .06/4)^4 - 1 = .06136.... (~6.14%).



when we use
(1 + r)^12 = (1 + .06/4)^4

anyway?

if you could briefly explain each step in a bit more detail, it would be greatly appreciated as i really would like to get my head around this.

thank you