Jane Frost wants to receive yearly payments of $15,000 for 10 years. How much mush she deposit at her bank today at 11% interest compounded annually?

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- Nov 30th 2005, 05:06 PM #1

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- May 6th 2007, 11:02 AM #2
I cant really tell you because i dont know for how long she intends to invest the money.

But A = P(1 + r/100)^n

If she wants $15 000 annually for 10 years, we can assume she wants $150 000 at the end of the investment period.

So 150 000 = P(1 + 11/100)^n

And then we can say that**P = (n-root(150 000)) / 1,11**

P is the initial amount invested

- Aug 23rd 2008, 05:14 PM #3

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Hi! I am trying to say..

Compound interest = P [1 + r/100]^n - P

P = $15,000 , n = 10 , r = 11%

Therefore,

Compound interest = 15000[1+11/100]^10-15000

= 15000 [111/100]^10 - 15000

= 15000[1.11]^10 -15000

= 15000[2.83942]-15000

= 42591.315 - 15000

= 27591.314

may be jane frost receive

- Aug 24th 2008, 03:10 AM #4

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## read it right?

If I read that right, she is taking out 15,000 every year thus she no longer gains interest when it is taken out.

I suggest working backwards, since you know she has $0 at the end.

On year 9 before the interest she has less than 15,000.

15,000 = x * 1.11, where x is the amount the year before still in the bank.

thus x = 15,000 / 1.11

Ok so now she had taken out 15,000 at year 9, so to get to year 8.

add the 15,000 to x from year 9.

15,000 / 1.11 + 15,000 , this is the amount before she withdrew her money.

now with this number you can find the amount at the beginning of year 8 before gaining interest (x).

15,000/1.11 + 15,000 = x * 1.11

thus x = (15,000/1.11 + 15,000)/1.11

now go through that 8 more times and your golden.

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