Results 1 to 2 of 2

Math Help - finance question plz need help

  1. #1
    Junior Member
    Joined
    Oct 2006
    Posts
    71

    finance question plz need help

    Paul deposits $6,000 at the end of each year for 30 years in an account paying 6% interest compounded annually.
    i) Find the final amount he will have on deposit.

    ii) Paulís sister works in a bank that pays 5.85% compounded annually. If he
    deposits his money in this bank instead of the one above, how much will he
    have in his account?
    i
    ii) How much would Paul lose over 30 years by using his sisterís bank?
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Grand Panjandrum
    Joined
    Nov 2005
    From
    someplace
    Posts
    14,972
    Thanks
    4
    Quote Originally Posted by gracy View Post
    Paul deposits $6,000 at the end of each year for 30 years in an account paying 6% interest compounded annually.
    i) Find the final amount he will have on deposit.
    Consider the $6000 deposited at the end of year 1, its worth $6000
    at the end of year 1, $6000*1.06 at the end of year 2, and $6000*(1.06)^(n-1)
    at the end of the n-th year.

    So the first years money is worth $6000*(1.06)^29 at the end of the 30-th
    year. the second years money is worth $6000*(1.06)^28 at the end of the
    30-th year, and so on.

    Therefore the total in the account at the end of 30 years is:

    $6000*[ (1.06)^29 + (1.06)^28 + ... + (1.06)^2 + 1.06 +1]

    ................. = $6000 [1-1.06^30]/[1-1.06] = $474349.12


    ii) Paulís sister works in a bank that pays 5.85% compounded annually. If he
    deposits his money in this bank instead of the one above, how much will he
    have in his account?
    In this case the 1.06 is replaced by 1.0585

    $6000*[ (1.0585)^29 + (1.0585)^28 + ... + (1.0585)^2 + 1.0585 +1]

    ................. = $6000 [1-1.0585^30]/[1-1.0585] = $465010.39

    ii) How much would Paul lose over 30 years by using his sisterís bank?
    $474349.12 - $465010.39 = $9338.73

    RonL

    (check the arithmetic and algebra if possible)
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. finance question
    Posted in the Business Math Forum
    Replies: 2
    Last Post: December 3rd 2011, 10:14 AM
  2. finance question
    Posted in the Business Math Forum
    Replies: 2
    Last Post: January 7th 2011, 12:37 PM
  3. Finance question
    Posted in the Business Math Forum
    Replies: 1
    Last Post: May 31st 2008, 02:21 PM
  4. Finance Question
    Posted in the Business Math Forum
    Replies: 3
    Last Post: August 26th 2007, 08:26 PM
  5. Finance question
    Posted in the Math Topics Forum
    Replies: 1
    Last Post: April 24th 2007, 01:57 PM

Search Tags


/mathhelpforum @mathhelpforum