Kindly check on my works based on the questions

[xxiandier]

This some question for my assignment and I already do the working. However, I'm not quite sure if I'm using the right formula. Can any of you check it for me whether I'm using the right formula or not.

1. A woman made a down payment of RM 90,000 for a house and agreed to pay 18 quarterly payments of RM 4,500 each. If the money is worth 4%, compounded quarterly, how much would the house have cost if she had paid cash?
Given D = 90000, R = 81000, r = 0.04, m = 4, t = 4.5, n = mt = 18, = 0.04/4


2. May wishes to accumulate a sum of RM 850,000 in a retirement account by the time of her retirement 30 years from now. If the account earns interest at the rate 7% per year, compounded monthly, how much should May deposit at the end of each month?

 

[JeffM]

Let's start with the first problem, and first ask whether your answer makes any sense.

90k paid initially + 81k paid in the future = 171k paid in total.

Now which would you prefer: to get all the money now or to wait for some of it? So if you are willing to wait for some of it, you certainly would not demand more for not waiting and might accept less for not waiting. in general, people want to be paid to wait. So no one in the world is going to pay over 1000k immediately when they could pay 171k over time. Your answer makes no sense.

You are being asked to compare a stream of payments over time with a payment now so this is a present value problem.

The formula that you used IS the correct formula for the present value of n payments of one monetary unit each at a given compounded interest rate. So why did you get the wrong answer?

Hint: there are two reasons.