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Math Help - Investment

  1. #1
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    Investment


    An investment advisor is planning the retirement of a customer. The customer has $10,000 dollars to invest and needs the investment to increase to $30,000 within 20 years...so 20 years or less.



    Now I need to figure out 2 investment plans to make the above numbers work themselves out. I am so incredibly frustrated. I thought of the compound interest formula, but the problem does not tell me how many times a year the investment can or should be compounded.


    Can someone please shed some light? I really need help!


    Thanks is advance!

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  2. #2
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    A=P\left(1+\frac{r}{100}\right)^t

    30,000=10,000\left(1+\frac{r}{100}\right)^{20}

    solve for r to find the required interest rate.
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  3. #3
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    Also

     I+P = \frac{PRT}{100}+P

     20,000+10,000 = \frac{10,000\times R\times 20}{100}+10,000

    once again solve for R to find required rate using simple interest.
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  4. #4
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    I have been told to use the formula A = Pe^rt.

    So, I get $30,000 = $10,000 e^20r

    I am unsure where to go from here????
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  5. #5
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    OK, I think I got it. I got a percentage of 5.5%.

    Can anyone tell me if this is correct?
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  6. #6
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    Quote Originally Posted by missyd819 View Post
    I have been told to use the formula A = Pe^rt.

    So, I get $30,000 = $10,000 e^20r

    I am unsure where to go from here????
    30000 = 10000e^{20r}

    divide both sides by 10000 ...

    3 = e^{20r}

    take the natural log of both sides ...

    \ln(3) = 20r

    r = \frac{\ln{3}}{20} \approx 0.055 or 5.5%


    now the big question ... do you know what the formula A = Pe^{rt} means?
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  7. #7
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    YESSSS! I got the 5.5% too. I figured it out. Sooo proud of myself!!

    I believe it means the money is continuously compounded.
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  8. #8
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    Quote Originally Posted by missyd819 View Post
    YESSSS! I got the 5.5% too. I figured it out. Sooo proud of myself!!

    I believe it means the money is continuously compounded.
    correct
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  9. #9
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    Question Investment

    Hi, I have noticed that this problem was already posted one time here, however even after reading I am still not clear on the investment plan part.
    The problem states: create three investment plans for customer who has $10,000 dollars to invest and needs the investment to increase to $30,000 dollars within 20 years.
    I have created a plan using Exponential Growth formula for a long term CD investment, and a Compound Interest Formula for a savings account. Now I am not sure what to use for the third plan . Anyone? I was thinking about investing in stocks with dividents for 20 years, however not sure what formulas to apply and how. Please Help!!

    thank you
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  10. #10
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    The poor guy wants to invest $10,000 and get back $30,000
    20 years later; he doesn't care HOW it's done: so why all the
    run around about 3 plans?
    10000(1 + i)^20 = 30000
    ONLY one annually compounded rate is possible.
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  11. #11
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    How did you use the Exponential Growth formula?

    I used continuous and I also found a plan on the Fidelity website that met the criteria for this plan. I need to use something else besides continuous growth, but I am unsure how to solve this using exponential growth.

    Thanks.
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