75iy 50pmt cptfv14708922

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Unformatted text preview: you want to buy a new house. You currently have $15,000 and you figure you need to have a 20% down payment. If the type of house you want costs about $150,000 and you can earn 7.5% per year, how long will it be before you have enough money for the down payment? Number of Periods – Example 2 Number of Periods – Example 2 Continued How much do you need to have in the future? Down payment needed = .2(150,000) = 30,000 Compute the number of periods PV = ­15,000 FV = 30,000 I/Y = 7.5 CPT N = 9.58 years Compounding Compounding Remember to make adjustment to interest (i) and number of period (N) using number of compounding (m) m = Number of Compounding m = 1 *** Yearly m = 12 *** Monthly m = 4 *** Quarterly m = 365 *** Daily Future Values with Monthly Compounding Future Values with Monthly Compounding Suppose you deposit $50 a month into an account that has annual interest of 9%, based on monthly compounding. How much will you have in the account in 35 years? Monthly rate = .09 / 12 = .0075 Number of months = 35(12) = 420 35(12) = 420 N 9 / 12 = .75 I/Y 50 PMT CPT FV = 147,089.22 Present Value with Daily Compounding Present Value with Daily Compounding You need $15,000 in 3 years for a new car. If you can deposit money into an account that pays an annual interest rate of 5.5% based on daily compounding, how much would you need to deposit? Daily rate = .055 / 365 = .00015068493 Number of days = 3(365) = 1095 3(365) = 1095 N 5.5 / 365 = .015068493 I/Y 15,000 FV CPT PV = ...
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This document was uploaded on 01/14/2014.

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