investment

yorkmanz

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invsestment


You and your spouse have just welcomed your first child. you realize you need to start saving for his education . you decide that you will begin investing 100/month into as RESP until his 18th birthday. use your calculators tvm solver answer


A) Assuming you can earn an average 7% on your investment (compounded monthly) how will the RESP be worth on the 18th birthday?

Future Balance
$43,679

b) With an RESP investment the government contribute 20% of what you invest directly into your RESP fund. if this 20% is added to your monthly investment how much is really invested every month?


c) Use this new monthly amount to determine the value of the RESP on your son's 18th birthday how much more was earned with the governments 20% contribution?.


d) You decide to start a second resp when your daughter is born and again invest 100/month up to her 18th birthday it is expected that you will be able to earn an average of 7,4% compounded monthly on this investment.calculate the total amount of this RESP using just you monthly investment and compare this to the amount it would be if you consider the 20% government contribution.

please help
thanks
 
For A, what is the correct formula to use? Have you tried using that formula? If so, what did you get as a result?
 
Please show what you entered into the solver, not just the result you got. We can't help you figure out what you did wrong without seeing what you did!

For part b, suppose I put in $100, and the government adds 20% to that. How much is being put in? I think that's all they're asking.
 
As Dr. P said, we need to see what you entered into your calculator.

Moreover, we cannot know how YOUR calculator works..

There are basically two ways to find the answer without a financial calculator. One is to use the formula for the future value of an annuity (available in excel). The other is to use a spreadsheet like excel to add up 204 different future values of each deposit.

Finally, I do not get the 43,679 mentioned in your first post. Where did that come from?
 
As Dr. P said, we need to see what you entered into your calculator.

Moreover, we cannot know how YOUR calculator works..

There are basically two ways to find the answer without a financial calculator. One is to use the formula for the future value of an annuity (available in excel). The other is to use a spreadsheet like excel to add up 204 different future values of each deposit.

Finally, I do not get the 43,679 mentioned in your first post. Where did that come from?



N = 216 (= 18*12)
I% = 7
PV = 0
PMT = 100
FV = 43072.10266
P/Y = 12
C/Y = 12

for b) still no clue?
 
Aha.

It will be 17 years until the child's 18th birthday so n should be 204, not 216.

Actually, it is a very simple mistake to make. But think about a baby's first birthday: has the child been alive 12 months or 24 months.

With respect to b, if the government is giving you a 20% addition to your monthly deposit, how much is actually being deposited each month? So just plug the actual deposit into the calculator. (This is actually not the FASTEST way to get the answer after you have done problem a, but in real life it makes no sense to do problem a if the conditions specified in b are true.)
 
It will be 17 years until the child's 18th birthday so n should be 204, not 216.

Actually, it is a very simple mistake to make. But think about a baby's first birthday: has the child been alive 12 months or 24 months.
Really? I don't see any mention of the first birthday in the problem; "You and your spouse have just welcomed your first child" means it was just born, doesn't it?

But if it did say the first birthday, I would probably have made that mistake ...
 
Really? I don't see any mention of the first birthday in the problem; "You and your spouse have just welcomed your first child" means it was just born, doesn't it?

But if it did say the first birthday, I would probably have made that mistake ...
Who knows what the problem says because our students seldom quote the problem exactly. But the birthday when you turn 18 years old is actually your 19th birthday. But it is almost invariably called your eighteenth birthday. The term is confusing in the extreme when used in math problems. And I should NOT have implied that the student made an error.

The student appears to have got an "incorrect" answer according to the answer key. Without knowing the exact wording of the problem, I cannot tell whether the answer key or the student is in error, but I am willing to bet that, if the answer key does give an answer of about 39k, the answer key used 204 payments, not 216. With 204 payments, we are at the eighteenth birthday, counting the day of actual delivery as the first birthday, but then the child of course is only 17 years old on that birthday.
 
a:)

N = 216 (= 18*12)
I% = 7
PV = 0
PMT = 100
FV = 43072.10266
P/Y = 12
C/Y = 12



b)

100*20%= 20


c)

100+20=120

216

7%

tvm solver gives

51686.52



d) no clue?

please correct if i am wrong
 
a:)

N = 216 (= 18*12)
I% = 7
PV = 0
PMT = 100
FV = 43072.10266
P/Y = 12
C/Y = 12



b)

100*20%= 20


c)

100+20=120

216

7%

tvm solver gives

51686.52



d) no clue?

please correct if i am wrong
This has been a very confusing thread. Please in the future give the exact and complete wording of the problem. In your very first post, you gave what seemed to be a proposed answer for problem a. It was not clear whether you were asking for an affirmation that it was the correct answer or whether that was the answer given in the answer key or what. The more information you give us the better.

In any case, if we assume that eighteenth birthday means the birthday on which someone turns 18 (which is the 18th birthday after the actual day of birth) and if we assume that the deposits are made on the first day of the month, starting with the first month, the theoretical answer to a is 43,323.36. If we assume that the deposits do not start until the first day of the second month, the theoretical answer to a is 43072.10, which is what your calculator gives you. I have no idea what the problem wants so I cannot tell you which is correct.

The same issue applies to the other questions. But you seem to be using your calculator sensibly although whether it is being used the way that the question wants is unknown.
 
i used this site for tvm
what i posted in the start is the exact wording no change
for b, c, d?
 
i used this site for tvm
what i posted in the start is the exact wording no change
for b, c, d?
Well some questions are not well worded.

Do you see that if you start depositing at the start of the first month, there will be an extra 100earning interest all along so that the value at the end will be greater?

That is why I got two different answers depending on which assumption is to be made.

I am still perplexed by the 43679 that you gave in your very first post. What was that supposed be?

Your calculator seems to be fine. I am just having trouble figuring out the question really means.
 
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