compound interest

• Feb 24th 2010, 06:50 AM
a2010
compound interest
Hi,
I would like some help on this question, all I really want is the formula and not for an outright answer. Thanks
The question is;
Determine the monthly repayments needed to pay a £100, 000 loan which is paid back over 25 years with an interest rate of 3% compounded annually.

EDIT: Nevermind, sorry.
• Feb 24th 2010, 08:57 AM
Wilmer
Well, did you get 474.21 ?
• Feb 25th 2010, 12:11 PM
a2010
Oh I got 478.63, but I'll probably double check it. The important thing is I know the right formulae and methods.
• Feb 25th 2010, 12:43 PM
Wilmer
Quote:

Originally Posted by a2010
The important thing is I know the right formulae and methods.

Not if you got 478.63 (Nerd)
• Mar 1st 2010, 09:25 AM
a2010
Ha, so how did you come up with 474.21? I'm pretty sure I had the right formula, but might have miscalculated.
• Mar 1st 2010, 09:49 AM
Wilmer
a = 100000, n = 25 * 12 = 300, i = .03 / 12 = .0025

p = ai / [1 - 1/(1+i)^n] = 474.21131....
• Mar 10th 2010, 02:52 PM
diehardmath4
also with compound interest
i = j Principal = 5000
Term = 7 yr
__ Nominal
m rate = 6.0
Compounding
frequency = semiannually

FV = P ( 1 + i )^n

for the ( 1 + i ) part would it be i : (1 + 0.06)^7 ?
• Mar 10th 2010, 06:21 PM
Wilmer
Quote:

Originally Posted by diehardmath4
i = j Principal = 5000
Term = 7 yr
Nominal m rate = 6.0
Compounding frequency = semiannually
FV = P ( 1 + i )^n
for the ( 1 + i ) part would it be i : (1 + 0.06)^7 ?

NO! (1 + .03)^14

n is not necessarily years; can be months, quarters .....
• Mar 11th 2010, 11:28 AM
diehardmath4
Duane borrowed \$3000 from his grandmother five years ago. The interest on the loan was to be 5% compounded semiannually for the first three years, and 6% compounded monty thereafter If he made a \$1000 payment 2 1/2 years ago, what is the amount now owed on the loan ?

-5 now
|_________|________|_______|______________________ _|
3000
_____________________________
semi annually ________________________
monthly

i'm getting screwed up with the timeline
• Mar 11th 2010, 12:12 PM
Wilmer
Quote:

Originally Posted by diehardmath4
Duane borrowed \$3000 from his grandmother five years ago. The interest on the loan was to be 5% compounded semiannually for the first three years, and 6% compounded monty thereafter If he made a \$1000 payment 2 1/2 years ago, what is the amount now owed on the loan ?

a = 3000(1.025)^5 - 1000 : 5 means semi-annual periods
b = a(1.025)
c = b(1.005)^24 = amount now owed : 24 means 24 months
• Mar 12th 2010, 07:52 AM
diehardmath4
Scheduled Payments: \$1300

Date of equivalent value: 9 months from now

Money can earn 5.5%

Compounding frequency: quarterly

PV = FV ( 1 + i )^-n

x = 1300 ( 1 + 0.01375 ) ^ -14

x = 1073.7698

x = 1073.77

1073.77 = x ( 1 + 0.01375 ) ^ -14 < i'm stuck here because i'm unsure if i am suppose to square root it to the 1/14 (Wondering)
• Mar 12th 2010, 09:05 AM
Wilmer
Quote:

Originally Posted by diehardmath4
Scheduled Payments: \$1300
Date of equivalent value: 9 months from now
Money can earn 5.5%
Compounding frequency: quarterly
PV = FV ( 1 + i )^-n
x = 1300 ( 1 + 0.01375 ) ^ -14
x = 1073.7698
x = 1073.77
1073.77 = x ( 1 + 0.01375 )^-14 < i'm stuck here because i'm unsure if i am suppose to square root it to the 1/14

Lookit Buddy, please start a new thread for a new problem; less confusing.

Also, please post the ORIGINAL problem clearly and IN FULL; what you posted is somewhat unclear.
I'm assuming exactly \$1,300 is due in 9 months (why is paymentS plural)?
And I'm assuming you're after the Present Value of this.
WHERE oh WHERE does your "-14" come from?
There are 3 quarterly periods in 9 months: a quarter means 3 months.
So keep it simple:
PV = FV / (1 + i)^n : this is the standard formula; FV(1 + i)^(-n) is same thing
PV = 1300 / (1 + .055/4)^3
PV = 1300 / 1.01375^3
PV = 1247.8165....