# word problems (compound interest related)

• Apr 15th 2009, 07:14 AM
wheresthecake
word problems (compound interest related)
Hi guys,

Can any one help me with some of these problems? Doing em for extra credit for high school thanks. These are interest (simple and compound) related, btw.

1) how long would it take to double your money in an account paying 6% compounded quarterly? After what time period would the interest earn equal the original princiaapl in an accout payin 6 % everyday?

2) a house is bought for $330,000 with a down payment of$40,000. what is the semi-annual payment for 25yrs if the interst rate is 12% comppunded semi-annually?

thanks! =)
• Apr 15th 2009, 07:27 AM
stapel
Quote:

Originally Posted by wheresthecake
1) how long would it take to double your money in an account paying 6% compounded quarterly? After what time period would the interest earn equal the original princiaapl in an accout payin 6 % everyday?

Use the compound-interest formula:

. . . . . $A\, =\, P\left(1\, +\, \frac{r}{n}\right)^{nt}$

...where the variables are as explained in the link above. For this particular exercise, r = 0.06 and n = 4. You aren't given an initial value or desired final value, but you are provided with a relationship between the two: A = 2P. So you need to solve:

. . . . . $2P\, =\, P\left(1\, +\, \frac{0.06}{4}\right)^{4t}$

...for the value of "t". You'll need to use logs to solve this exponential equation.

I'm not sure what is meant in the second part of this exercise. It sounds as though the interest term is one day, rather than one year with daily compounding...?

Quote:

Originally Posted by wheresthecake
2) a house is bought for $330,000 with a down payment of$40,000. what is the semi-annual payment for 25yrs if the interst rate is 12% comppunded semi-annually?

What formula(s) have they given you for this? How far have you gotten in the application of this/them?

Please be complete. Thank you! :D
• Apr 15th 2009, 06:59 PM
wheresthecake
we were given the formula for compound interest and the future value of P [ p(1 + (r/m))^m ] =)