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Math Help - compound interest

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    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.
    Last edited by a2010; February 24th 2010 at 06:40 AM.
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  2. #2
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    Well, did you get 474.21 ?
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  3. #3
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    Oh I got 478.63, but I'll probably double check it. The important thing is I know the right formulae and methods.
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  4. #4
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    Quote Originally Posted by a2010 View Post
    The important thing is I know the right formulae and methods.
    Not if you got 478.63
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  5. #5
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    Ha, so how did you come up with 474.21? I'm pretty sure I had the right formula, but might have miscalculated.
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  6. #6
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    a = 100000, n = 25 * 12 = 300, i = .03 / 12 = .0025

    p = ai / [1 - 1/(1+i)^n] = 474.21131....
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  7. #7
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    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 ?
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  8. #8
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    Quote Originally Posted by diehardmath4 View Post
    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 .....
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  9. #9
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    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
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  10. #10
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    Quote Originally Posted by diehardmath4 View Post
    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
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  11. #11
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    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
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  12. #12
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    Quote Originally Posted by diehardmath4 View Post
    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....
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