Math of Finance

[makersmark]

I have a simple compounding interest problem but am experiencing a total brainfart. Please help!

You have $2500 toward the purchase of a boat that will cost $3000. How long will it take to reach $3000 if you invest the $2500 at 1.25% compounded quarterly. Must show the algebra.

The formula to use is ... S=P(1+r/m)^mt

So solving for t..... 3000=2500(1+.0125/4)^4t
3000=2500(1.003125)^4t

Sad to say this is where I'm stuck .... I believe I should be using a log for the variable exponent but the process just wont come to me.

 

[Deleted member 4993]

I have a simple compounding interest problem but am experiencing a total brainfart. Please help!

You have $2500 toward the purchase of a boat that will cost $3000. How long will it take to reach $3000 if you invest the $2500 at 1.25% compounded quarterly. Must show the algebra.

The formula to use is ... S=P(1+r/m)^mt

So solving for t..... 3000=2500(1+.0125/4)^4t
3000=2500(1.003125)^4t

Sad to say this is where I'm stuck .... I believe I should be using a log for the variable exponent but the process just wont come to me.

you almost got it...

3000/2500 = (1.003125)^(4t)

1.2 = (1.003125)^(4t)

ln(1.2) = 4*t*ln(1.003125)

t = 1/4 * ln(1.2)/ln(1.003125) = 1/4 * 58.43401155

Now solve for 't'...

 

[makersmark]

You're awesome .... thanks!!!