Thread: 2 Problems regarding Future Value of Loans/Investments

I have 2 similar application problems that I can't seem to figure out...

1) A firm buys 12 file cabinets at $140 each, with the bill due in 90 days. How much must the firm deposit now to have enough to pay the bill if money is worth 12% per year? Use 360 days in a year.

and

2) If you want to earn 15% annual simple interest on an investment, how much should you pay for a note that will be worth $13,500 in 10 months?

The answer for #1 (back of the book) is $1,631.07 and the answer for #2 is $12,000.

For question 1, I'm coming up with $1,612.80 by using the formula: I=prt, which comes out to 1680(0.12)(1/3)

For question 2, I am completely clueless as to how to even begin this problem!

Question 1: 1680(.12)(1/4) ; OK?

Question 2: 12 months = .15 ; 10 months = .15 / 12 * 10 = .125
13500 / 1.125 = 12000

Originally Posted by Wilmer

Question 1: 1680(.12)(1/4) ; OK?

Question 2: 12 months = .15 ; 10 months = .15 / 12 * 10 = .125
13500 / 1.125 = 12000

For question 1, using 1680(.12)(1/4), I'm getting 50.4. I'm not able to figure out how using that calculation which results in 50.4 leads to the answer (1,631.07).

For question 2, how did you get 1.125 for 10 months? Your calculation is correct and matches with the answer in the book, but I'm just wondering how you came up with 1.125. Thanks!

Originally Posted by tfs985

For question 1, using 1680(.12)(1/4), I'm getting 50.4. I'm not able to figure out how using that calculation which results in 50.4 leads to the answer (1,631.07).

I was trying to show you that your 1680(.12)(1/3) should be 1680(.12)(1/4):
.12 / 4 = .03 ; 1680 / 1.03 = 1631.07

Originally Posted by Wilmer

I was trying to show you that your 1680(.12)(1/3) should be 1680(.12)(1/4):
.12 / 4 = .03 ; 1680 / 1.03 = 1631.07

Oh ok gotcha...I was multiplying instead of dividing.

Also, for question #1 I was just screwing up the formula, so I know how you got the 1.125...thanks again.

Originally Posted by tfs985

For question 2, how did you get 1.125 for 10 months? Your calculation is correct and matches with the answer in the book, but I'm just wondering how you came up with 1.125. Thanks!

I showed you this: 12 months = .15 ; 10 months = .15 / 12 * 10 = .125
Are you saying you can't understand how the result is .125 ?

Originally Posted by Wilmer

I showed you this: 12 months = .15 ; 10 months = .15 / 12 * 10 = .125
Are you saying you can't understand how the result is .125 ?

I would hope that my mental facilities aren't that dull. I asked you how you got 1.125, then I reviewed my notes and discovered that the formula called for p + .125p. So now, I was not saying that I can't understand how the result is .125.

Good for you.

Originally Posted by Wilmer

Good for you.

By da wayz....wut 2 + 2 izz? I forgotz how 2 be addin numberz and I's needz da anszer to dis questin fo my's final ixam. U iz einstine!

Very funny! Wilmer Einstine ? Compliments will get you everywhere...

Seriously: when I posted my question to you on .125, I was not aware of your "Gotcha!" post:
have a look at the times: yours was 1 minute before mine. Regardless, "sorree bout dat!".