Results 1 to 10 of 10

- September 5th 2009, 08:48 PM #1

- Joined
- Jan 2009
- Posts
- 98

## Another C.A. Question

I have completed the following question, but not sure if it is correct.

*1. Sarina is saving for her ovseas trip to Los Angeles and needs to save $540 in 3 months. What amount of money must she invest at 9% p.a. in order to earn this amount?*

I= Prn

540= P x 0.09 x 0.25

540/0.225 = 2400

Therefore, Sarina must invest $2400 in order to earn this amount.

- September 5th 2009, 10:25 PM #2

- Joined
- May 2009
- Posts
- 7

- September 5th 2009, 10:41 PM #3

- Joined
- Jan 2009
- Posts
- 98

- September 5th 2009, 11:30 PM #4

- Joined
- Jan 2009
- Posts
- 98

- September 5th 2009, 11:59 PM #5

- Joined
- Nov 2005
- From
- someplace
- Posts
- 14,972
- Thanks
- 4

- September 6th 2009, 12:04 AM #6

- Joined
- Jan 2009
- Posts
- 98

- September 6th 2009, 01:57 AM #7
540/0.025 = 24 000. That's why.

No it's not.

I've assumed two things:

1. Simple interest.

2. The money has to be raised by earning simple interest on the principle - the principle is not allowed to be spent (perhaps someone loaned it Sarina to earn interest).

- September 6th 2009, 02:33 AM #8

- Joined
- Jan 2009
- Posts
- 591

If Sarina invests $100 for 1 year at 9% p.a. how much money would she receive as earned interest?

You should answer $9

However, since it is only for 3 months or 1/4 year, how much would that amount be?

You should answer $2.25

If she is required to have $540 in 3 months how many**hundred dollar bills**must she invest?

You answer should be

- September 6th 2009, 08:04 AM #9

- Joined
- Nov 2005
- From
- someplace
- Posts
- 14,972
- Thanks
- 4

- September 7th 2009, 10:29 AM #10

- Joined
- Sep 2009
- Posts
- 7

Here is a way to calculate it

I = P R T

540 = P * .09 * (3/12) -- Now get P by itself

Since the interest rate is annual you must remember that you are only going to be accruing 3 months worth so 3/12 will give you the correct T value.

540 / (.09 * 3/12) = P

P = 24,000

Interest rates are assumed to be compounded annually unless otherwise specified. Since no other value was given it is safe to assume that this answer is correct. Also if you look at it from a real prospective if you go to the bank and make a deposit, even at a high interest rate like 9% your going to need alot more than $2400 to produce a return like $540 in only 3 months.

Hope that helps