Future Value Interest formula...

[girlziegurl]

Question: Guaranty Income Life offered an annuity that pays 6.65% compounded monthly. If $500 is deposited into this annuity every month, how much is in the account after 10 years? How much of this is interest?

We are supposed to use FV=(PMT( 1+i )^n +1)/ i

we were given i=r/m and n=m/t in the previous section, so i figure that we would be using them throughout the chapter.

PMT= $500
i = r/m i = .0665/12
n= m/t n= 12/10

what am I doing wrong, as I have plugged these numbers in, and have not gotten the correct answer...

value= $84,895.40
interest= $24895.40

 

[Mrspi]

Question: Guaranty Income Life offered an annuity that pays 6.65% compounded monthly. If $500 is deposited into this annuity every month, how much is in the account after 10 years? How much of this is interest?

We are supposed to use FV=(PMT( 1+i )^n +1)/ i

we were given i=r/m and n=m/t in the previous section, so i figure that we would be using them throughout the chapter.

PMT= $500
i = r/m i = .0665/12
n= m/t n= 12/10

what am I doing wrong, as I have plugged these numbers in, and have not gotten the correct answer...

value= $84,895.40
interest= $24895.40

It would certainly help ME if I knew what the various variables represent. It's nice to have that formula for FV, but I would feel better if I knew what m, r, n, and t represent.....

Are your last numbers supposed to be the correct answers? It would be nice to know that, too.

 

[mmm4444bot]

We are supposed to use FV=(PMT( 1+i )^n +1)/ i ? I think this formula is wrong.

n = m/t ? I think this is wrong, too.

I'm with Mrs. Pi because many financial formulas can be stated in different forms. In the future, please define your symbols.

I'm guessing that:

m = number of compounding periods per year

n = total compounding periods over t years

If this is correct, then try n = m*t, instead.

Also, in the formula for FV, the monthly payment amount should not be part of the numerator AND the +1 should be -1.

FV = PMT * [(1 + i)^n - 1]/i

Making these three changes yields the values in red that you posted, although I find that the cents on each round to 0.41 versus 0.40.

 

[girlziegurl]

the numbers at the bottom are the answers.

i = interest rate
PMT = periodic payment amount
n = number of compunding periods
FV = future value

 

[mmm4444bot]

Okay. Try the three changes that I posted, and, if you do not get the values in red (ignoring the missing cent), then you've made arithmetic error(s).

Please show your substitutions and arithmetic.

 

[girlziegurl]

Re:

[/quote]

I'm with Mrs. Pi because many financial formulas can be stated in different forms. In the future, please define your symbols.

I'm guessing that:

m = number of compounding periods per year

n = total compounding periods over t years

If this is correct, then try n = m*t, instead.

Also, in the formula for FV, the monthly payment amount should not be part of the numerator AND the +1 should be -1.

FV = PMT * [(1 + i)^n - 1]/i

Making these three changes yields the values in red that you posted, although I find that the cents on each round to 0.41 versus 0.40.

[/size][/quote]


could you please explain how you arrived at this answer?

 

[mmm4444bot]

I looked up financial formulas at Wikipedia.

I substituted the following values, into the formula, followed by doing the arithmetic.

PMT = 500

r = 0.0665

m = 12

t = 10

i = r/m

n = m * t

FV = PMT * [(1 + i)^n - 1]/i

If you need more help, please show your work.

 

[girlziegurl]

Re:

I looked up financial formulas at Wikipedia.

I substituted the following values, into the formula, followed by doing the arithmetic.

PMT = 500

r = 0.0665

m = 12

t = 10

i = r/m

n = m * t

FV = PMT * [(1 + i)^n - 1]/i

If you need more help, please show your work.

FV = 500 (1 + (.0665/12))^120 -1
(.0665/12)

FV = error

 

[mmm4444bot]

FV = 500 (1 + (.0665/12))^120 -1 You need parentheses around the numerator.
(.0665/12)

FV = error

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