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Math Help - Finding present value

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    Finding present value

    A $50 U.S. Savings Bond paying 6.22% compounded monthly matures in 11 years 2 months. What is the present value of the bond?
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    Quote Originally Posted by dc52789 View Post
    A $50 U.S. Savings Bond paying 6.22% compounded monthly matures in 11 years 2 months. What is the present value of the bond?
    the formula for the present value, P, is given by

    P = \frac F{(1 + r)^n}

    where F is the future value of the money, in this case, the value at maturity, r is the interest rate in decimal form, and n is the number of years it will take to get to F, which in this case, is \frac {67}6 \approx 11.167.

    now to find F, use the regular compound interest formula, then plug it into the formula above to find the present value
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    Quote Originally Posted by Jhevon View Post
    the formula for the present value, P, is given by

    P = \frac F{(1 + r)^n}

    where F is the future value of the money, in this case, the value at maturity, r is the interest rate in decimal form, and n is the number of years it will take to get to F, which in this case, is \frac {67}6 \approx 11.167.

    now to find F, use the regular compound interest formula, then plug it into the formula above to find the present value
    I don't get all that and I have no idea how you get 67/6.
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    Quote Originally Posted by dc52789 View Post
    I don't get all that and I have no idea how you get 67/6.
    what i gave you are definitions. and the 67/6 is 11 years and 2 months. this is 11 years and 2/12 years, which is 67/2 years if you add those fractions, or 11.167 years.

    the formula for P is the present value, which is what you are after. and i told you what the pieces of the formula are. so just find them one by one. r and n were given, now find F as directed
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    Quote Originally Posted by Jhevon View Post
    what i gave you are definitions. and the 67/6 is 11 years and 2 months. this is 11 years and 2/12 years, which is 67/2 years if you add those fractions, or 11.167 years.

    the formula for P is the present value, which is what you are after. and i told you what the pieces of the formula are. so just find them one by one. r and n were given, now find F as directed
    Um...I got 25 as my answer. is it correct?
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    Quote Originally Posted by dc52789 View Post
    Um...I got 25 as my answer. is it correct?
    nope, using 3 decimal places, i got $50.95

    it should be close to the principal, but a little bigger, unless you're losing money, which we're not

    what did you get for F?
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    Quote Originally Posted by Jhevon View Post
    nope, using 3 decimal places, i got $50.95

    it should be close to the principal, but a little bigger, unless you're losing money, which we're not

    what did you get for F?
    I don't know how you get that.
    So...
    n = 12
    r = .0622
    t = 11.167
    I don't know which one the $50 go to.
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    Quote Originally Posted by dc52789 View Post
    I don't know how you get that.
    So...
    n = 12
    r = .0622
    t = 11.167
    I don't know which one the $50 go to.
    the 50 is the P (principal) in the compound interest formula
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    Quote Originally Posted by Jhevon View Post
    the 50 is the P (principal) in the compound interest formula
    I did that and still got 25
    I did it like this
    50(1+(0.0622/12))^(-12x11.167)
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    Quote Originally Posted by dc52789 View Post
    I did that and still got 25
    I did it like this
    50(1+(0.0622/12))^(-12x11.167)
    where did the minus sign in your formula come from?

    using that same formula, without the minus sign, i get 99.96 for that. use that as F in the first formula i gave
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    Quote Originally Posted by Jhevon View Post
    where did the minus sign in your formula come from?

    using that same formula, without the minus sign, i get 99.96 for that. use that as F in the first formula i gave
    then, the answer would be 48.46
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    is up to his old tricks again! Jhevon's Avatar
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    Quote Originally Posted by dc52789 View Post
    then, the answer would be 48.46
    what exactly are you doing?

    i double checked and got the same answer as last time. i think you're probably plugging in things in your calculator wrong
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    Quote Originally Posted by Jhevon View Post
    what exactly are you doing?

    i double checked and got the same answer as last time. i think you're probably plugging in things in your calculator wrong
    This is what I did.
    99.96/(1+0.0622)^12 = 48.46
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    Quote Originally Posted by dc52789 View Post
    This is what I did.
    99.96/(1+0.0622)^12 = 48.46
    in the present value formula, n is the number of years, not the number of times it is compounded. you should have 11.167, not 12
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    Quote Originally Posted by Jhevon View Post
    in the present value formula, n is the number of years, not the number of times it is compounded. you should have 11.167, not 12
    I just realized that this may not be the right answer. There's no way the answer could be $50.95.
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