# Present Value, Future Value, Rate

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• Jun 16th 2007, 03:38 PM
Jhevon
Quote:

Originally Posted by neverlosehope
If a person borrowed \$2000 at 15%on the first of June 2000 to pay it in two equal times: the first on December 1st, 2000 & the other on June 1st,2001 & if the datum date was June 1st,2000. Calculate the value of each payment

X??
p= m/(1+rt) ...........this is the formula given

2000= X/(1+0.15*6/12) + X/(1+0.15*12/12) ....the interest is applied per year. we have 2 payments, one is after 6 months, the other is after a year. 6 months is 6/12 of a year (since we have 6 out of 12 months--so it's half a year), so we plug in 6/12 for t in the first part. 12/12 means 12 months out of 12 months, which is just one, so that's when the interest is applied after one year, so we put that for t in the second part of the formula. 15% = 0.15 as i explained earlier, so that is what we plug in for r in both parts of the formula. and now we just need to solve for x

we get,

2000 = x/1.075 + x/1.15 ........adding these fractions we get
2000 = 1.799797776x

=> x = 2000/1.799797776 = 1111.24

Quote:

if the datum date was changed to be 1/6/2001.calculate the value of each payment.
M= p(1+rt)
M= 2000 (1+0.15*1)= 2300
So, 2300 = X (1 + 0.15 * 6/12) + X
2300=2.075 X
X= 1108.43

.....here we just applied the formula with p = 2000, t = 1 since it's after 1 year, r = 0.15 = 15% and solved for x

for the first: x/1.075 + x/1.15 = x(1/1.075 + 1/1.15) if we factor out the x

so we just add the numbers in the brackets to get the coefficient of x, and then we divide both sides by that number to get x by itself on one side of the equation
• Jun 16th 2007, 03:41 PM
neverlosehope
So, 2300 = X (1 + 0.15 * 6/12) + X
2300=2.075 X

X= 1108.43

I can understand that part
• Jun 16th 2007, 03:47 PM
neverlosehope
M= p(1+rt)
M= 2000 (1+0.15*1)= 2300

this after one year

so, why we did this step:
So, 2300 = X (1 + 0.15 * 6/12) + X
2300=2.075 X
X= 1108.43

I can understand that part
• Jun 16th 2007, 03:50 PM
Jhevon
Quote:

Originally Posted by neverlosehope
So, 2300 = X (1 + 0.15 * 6/12) + X
2300=2.075 X

X= 1108.43

I can understand that part

here the interest is applied after the 6 month period, so only the first payment would be affected by the interest. since the second payment is 6 months after that, interest would not be applied to it. so if x is the amount we pay each time, we add the interest the first time, and no interest the second time

these are weird questions though
• Jun 16th 2007, 03:56 PM
neverlosehope
ok i understand that but, i think we don't need to write this step in the exam right?
• Jun 16th 2007, 04:00 PM
Jhevon
Quote:

Originally Posted by neverlosehope
ok i understand that but, i think we don't need to write this step in the exam right?

i believe so, yes. they used it to get to the answer after all.
• Jun 16th 2007, 04:07 PM
neverlosehope
I don't really what to say thank you soooooo much i have an exam after few hours so thank you soo much
• Jun 16th 2007, 04:13 PM
Jhevon
Quote:

Originally Posted by neverlosehope
I don't really what to say thank you soooooo much i have an exam after few hours so thank you soo much

well, good luck with that.

business math is wierd:D ...kind of like some of the math in economics
• Jun 16th 2007, 04:18 PM
neverlosehope
The exam problems:
simpe interest
present value
value equation
compoud interest
discount
partial paument(Usa rule)
Anuitties
Amortization & amortization schedual

But, i think every thing is gonna be fine
• Jun 16th 2007, 04:19 PM
neverlosehope
Wowwwwwwwwwwwwwwwwww
:) :) :) :) :) :) It's my last Exammm :) :) :) :) :) :)
• Jun 16th 2007, 05:00 PM
neverlosehope
Q
Can you tell me how to solve these kind of problems
How to differetiate between the M & P
& when i read the problem what's the first thing i have to think of.
THanks
• Jun 16th 2007, 05:05 PM
Jhevon
Quote:

Originally Posted by neverlosehope
Can you tell me how to solve these kind of problems
How to differetiate between the M & P
& when i read the problem what's the first thing i have to think of.
THanks

P is for Principal. it is the original amount that we started with. So in your last question, P was the 2000 that was borrowed

M is for aMount, it is the amount we get after the interest is applied over some period of time
• Jun 16th 2007, 05:09 PM
neverlosehope
OK all the problem i have read
it'a ll about a person indebted or signed a loan for \$.... that was due it's m
& all the problems that say a person borrowedn on whatever any day it's p
is that a standred
• Jun 16th 2007, 05:12 PM
Jhevon
Quote:

Originally Posted by neverlosehope
OK all the problem i have read
it'a ll about a person indebted or signed a loan for \$.... that was due it's m
& all the problems that say a person borrowedn on whatever any day it's p
is that a standred

No, P is what was borrowed and M is what is due
• Jun 16th 2007, 05:21 PM
neverlosehope