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Math Help - need urgently...finance math

  1. #1
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    need urgently...finance math

    1) If the cost of long term care is increasing at 7 percent a year, what will be the approximate monthly cost for Fran's mother eight years from now?

    2) Fran and Ed plan to deposit $1500 a year to thier RRSP's fpr 35 years. If they earn an average annual return of 9 percent, what will be the value of their RRSP's after 35 years?

    I know the answers to the above questions but I just don't know what formulas to use for both of them. Can someone please tell me the formulas that I should use for each of the above questions. And I'll post the work + answers that I get for both of them just to verify.
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  2. #2
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    Re: need urgently...finance math

    These problems use the formula for compound interest which is

    \displaystyle A = P\left(1+ \frac{r}{100}\right)^t


    Quote Originally Posted by perron View Post
    1) If the cost of long term care is increasing at 7 percent a year, what will be the approximate monthly cost for Fran's mother eight years from now?

    Let x be the annual cost of long term care, with a 7% increase per year over eight years the monthly cost will be

    \frac{1.07^8\times x}{12}




    Quote Originally Posted by perron View Post
    2) Fran and Ed plan to deposit $1500 a year to thier RRSP's fpr 35 years. If they earn an average annual return of 9 percent, what will be the value of their RRSP's after 35 years?

    Similar to the first question, the total value will be 1.09^{35}\times 1500
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  3. #3
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    Re: need urgently...finance math

    Quote Originally Posted by perron View Post
    2) Fran and Ed plan to deposit $1500 a year to thier RRSP's fpr 35 years. If they earn an average annual return of 9 percent, what will be the value of their RRSP's after 35 years?
    1500(1.09^35 - 1) / .09 = 323566.132...
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