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Math Help - Another C.A. Question

  1. #1
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    Post 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.
    Last edited by JadeKiara; September 5th 2009 at 11:30 PM.
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  2. #2
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    Quote Originally Posted by JadeKiara View Post
    I have completed the following question, but not sure if it is correct.
    It's correct!
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  3. #3
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    Thanks Mate

    Why, thank you Mr. Smith!

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  4. #4
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    Actually, wouldn't this be $24,000?

    Can anyone help, please?
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  5. #5
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    Quote Originally Posted by JadeKiara View Post
    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.
    The thread title indicates that this is compound interest not simple interest. Also is there not something wrong if you have to deposit $2400 today at a positive interest rate to have $540 in three months?

    CB
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  6. #6
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    Thread Title? Do you mean "Another Consumer Arithmetic Question"?

    Why does my calculator indicate that 540/0.0225 = 24 000?

    I don't understand.
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  7. #7
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    Quote Originally Posted by JadeKiara View Post
    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 Mr F says: 540/0.225 is not correct. It's 540/0.025

    Therefore, Sarina must invest $2400 in order to earn this amount.
    Quote Originally Posted by JadeKiara View Post
    Thread Title? Do you mean "Another Consumer Arithmetic Question"?

    Why does my calculator indicate that 540/0.0225 = 24 000?

    I don't understand.
    540/0.025 = 24 000. That's why.

    Quote Originally Posted by Mr Smith View Post
    It's [2400] correct!
    No it's not.

    Quote Originally Posted by CaptainBlack View Post
    The thread title indicates that this is compound interest not simple interest. Also is there not something wrong if you have to deposit $2400 today at a positive interest rate to have $540 in three months?

    CB
    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).
    Last edited by mr fantastic; September 6th 2009 at 04:02 AM. Reason: Fixed a typo.
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  8. #8
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    Quote Originally Posted by JadeKiara View Post
    ...
    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?
    ...
    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  \dfrac{540}{2.25}
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  9. #9
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    Quote Originally Posted by JadeKiara View Post
    Thread Title? Do you mean "Another Consumer Arithmetic Question"?

    Why does my calculator indicate that 540/0.0225 = 24 000?

    I don't understand.
    Ahh.. I missread that, and so assumed compound interest>

    CB
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  10. #10
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    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
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