I am doing something wrong as when i take the log of both sides of the equation then the answer I am expecting is not correct

Can someone help me solve for p in the following equation

(1+i)^p = 0.8 + 0.2(1+i)^n

Thanks

Printable View

- Aug 4th 2011, 11:21 AMdexteronlineSolving for Number of Periods (Help with Log)
I am doing something wrong as when i take the log of both sides of the equation then the answer I am expecting is not correct

Can someone help me solve for p in the following equation

(1+i)^p = 0.8 + 0.2(1+i)^n

Thanks - Aug 4th 2011, 11:33 AManonimnystefyRe: Solving for Number of Periods (Help with Log)
what is the n in the equation?

- Aug 4th 2011, 11:38 AMe^(i*pi)Re: Solving for Number of Periods (Help with Log)
If you take the natural log of both sides you get: $\displaystyle p \ln (1+i) = \ln(0.8+0.2(1+i)^n)$. This is because of the law that says $\displaystyle \ln(a^b) = b\ln |a|$

However you will not be able to simplify the RHS since $\displaystyle \ln(a+b) \neq \ln(a)+\ln(b)$ - Aug 4th 2011, 11:42 AMPlatoRe: Solving for Number of Periods (Help with Log)
- Aug 4th 2011, 11:55 AMdexteronlineRe: Solving for Number of Periods (Help with Log)
Thanks you both for your help

It seems that I have done something terribly wrong with the way I have attempted to solve a business math problem

The problem I was attempting to solve has to do with finding the month in which the Outstanding Principal of the Loan is equal to 80% of the Home Value

Take this for example

Home Value is $300,000

Loan Amount is $250,000

Interest rate (annual) is 5%

Number of Years in the loan is 30

Now when I used the formula to find outstanding balance at the end of 31st month, it nearly equals 80% of the Home Value of 240,000

Outstanding balance is roughly 240,081.85

It is calculated using this formula

L [ (1+i)^n - (1+i)^p]/[(1+i)^n - 1 ]

where L is the loan amount of 250,000

i is the interest rate 5%/12

p is the period for which I seek the outstanding principal and in this case is 31

n is the number of months for loan equal to 360

Here is where I screwed up, to find p from this equation I set the equation to 0.8L

obviously it should have been set equal to 0.8HV

HV is the home value

Even when I set it equal to HV in the last 10 minutes I seem to be going no where

My attempt here is to find the month p where the outstanding principal is equal to 80% of the home value

Is there a simpler way of finding out the month where the remaining balance is equal to a certain amount in this case 80% of the home value - Aug 4th 2011, 12:04 PMe^(i*pi)Re: Solving for Number of Periods (Help with Log)
Sounds like a problem which is more easily solved using the compound interest formula: $\displaystyle A = P \left(1+\dfrac{r}{n}\right)^{rt}$

Where,

* A = final amount

* P = principal amount (initial investment)

* r = annual nominal interest rate (as a decimal - it should not be in percentage)

* n = number of times the interest is compounded per year

* t = number of years

You want to find the value of t when: $\displaystyle A = 0.8 \times 300,000 = 240000$

Does the question say how often interested is compounded?

If it's compounded monthly: $\displaystyle 240000 = 250000\left(1+\dfrac{0.05}{12}\right)^{0.05t}$

If it's compounded continuously: $\displaystyle 240000 = 250000 \cdot e^{0.05t}$ - Aug 4th 2011, 12:34 PMdexteronlineRe: Solving for Number of Periods (Help with Log)
Sorry for the delayed reply

The compounding is monthly for the mortgage problem

I was testing the formula and noticed if I use 250000 the log turns out to be a negative number

Yet when I use the monthly payment amount of 1342.05, the answer is twice the number I expected

=LOG(240000/1342.05)/LOG(1+5%/12)*0.05

62.37

when I expect a value of slightly higher than 31 - Aug 4th 2011, 03:15 PMdexteronlineRe: Solving for Number of Periods (Help with Log)
- Aug 4th 2011, 07:32 PMWilmerRe: Solving for Number of Periods (Help with Log)
Can't follow what you've done...but it's wrong! This'll do it:

a = 250000

f = 240000

p = 1342.05

i = .05/12

k = 1 + i

x = (fi - p) / (ai - p)

n = log(x) / log(k) = 31.23991....

Your problem could be worded this simply:

$250000 is borrowed at rate of 5% annual compounded monthly, requiring monthly payments

of $1342.05 over 30 years. After how many months will the amount owing be $240000? - Aug 5th 2011, 12:01 AMdexteronlineRe: Solving for Number of Periods (Help with Log)
- Aug 5th 2011, 04:18 AMWilmerRe: Solving for Number of Periods (Help with Log)
I see NO reasons to use "e".

How can a variable representing the targeted amount (f = 240000 in this case) NOT be part of equation?!

a = 250000

f = 240000

p = 1342.05

i = .05/12

k = 1 + i

I combined the FV of amount and FV of annuity formulas:

a(k^n) - p[(k^n - 1]/i = f

and solved above for n. - Aug 5th 2011, 05:07 AMdexteronlineRe: Solving for Number of Periods (Help with Log)