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Math Help - Having trouble finding x

  1. #1
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    Having trouble finding x

    This is a finance question - PVIFA

    575 = (1-1/(1+r)^12)/r)50
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  2. #2
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    Re: Having trouble finding x

    Since 'x' is not in the equation, I guess it can be anything you like!

    NonTrivial exercise. Try this:

    1) Solve for one fo the 'r's and take a good guess.

    f(r) = r = \frac{50}{575}\left[1 - \frac{1}{(1+r)^{12}}\right]

    You THINK the answer might be around 8% Annual, so give a good try of r = 0.006434

    f(0.006434) = 0.006441 -- I am delighted that it was so close. Do it again.
    f(0.006441) = 0.006448 -- A little disappointing. It moved 7. Do it again.
    f(0.006448) = 0.006455 -- Ack. It moved 7 again!
    Well, it's not winning any awards for convergence, but it is getting there. Get a computer program to do more iterations. After a few hundred, it settles down to r = 0.00660 91533 89984 (Sorry, I don't know how to shut off Skype) which leads to an annual rate of around 8.225725%.

    That's one way to go about it. There are others.
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  3. #3
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    Re: Having trouble finding x

    Quote Originally Posted by TKHunny View Post
    Since 'x' is not in the equation, I guess it can be anything you like!

    NonTrivial exercise. Try this:

    1) Solve for one fo the 'r's and take a good guess.

    f(r) = r = \frac{50}{575}\left[1 - \frac{1}{(1+r)^{12}}\right]

    You THINK the answer might be around 8% Annual, so give a good try of r = 0.006434

    f(0.006434) = 0.006441 -- I am delighted that it was so close. Do it again.
    f(0.006441) = 0.006448 -- A little disappointing. It moved 7. Do it again.
    f(0.006448) = 0.006455 -- Ack. It moved 7 again!
    Well, it's not winning any awards for convergence, but it is getting there. Get a computer program to do more iterations. After a few hundred, it settles down to r = 0.00660 91533 89984 (Sorry, I don't know how to shut off Skype) which leads to an annual rate of around 8.225725%.

    That's one way to go about it. There are others.
    I don't understand what you mean by, "solve for one of the R's"
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  4. #4
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    Re: Having trouble finding x

    Quote Originally Posted by NeedsHelpp View Post
    I don't understand what you mean by, "solve for one of the R's"
    Essentially you have to converge on a solution largely by guessing.
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  5. #5
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    Re: Having trouble finding x

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  6. #6
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    Re: Having trouble finding x

    Quote Originally Posted by NeedsHelpp View Post
    This is a finance question - PVIFA

    575 = (1-1/(1+r)^12)/r)50
    solve 575 = (1-1/(1+r)^12)/r)5 0 - Wolfram|Alpha
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