Need Help figuring out this problem! ASAP!

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stephtacularx

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Nov 13, 2010
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Hi, I need help figuring out this Consumer Math problem. i have no idea how to do it so a step by step explanation would be really helpful. This is the problem..

McCabe Industrial Corp. borrowed $795,000 for an upgrade of its plant, borrowing the money at 8.8% compounded daily for 6 years. McCabe is not required to make any payments to the lender until maturity, but is required to set up a sinking fund for the purpose of accumulating the loan's maturity value.

Required:
If they make quarterly deposits into an account earning 4%, how much should each payment be? (Round your answer to 2 decimal places.)

I really need this asap if you can help it'd be appreciated. Thank you!!
 
stephtacularx said:
> i have no idea how to do it so a step by step explanation would be really helpful.
WHY is that? Did your teacher not supply the required formulas? Or are you learning this on your own?
I'll give you the "how" with no explanations, as this is not a classroom (Forum rules):

> McCabe Industrial Corp. borrowed $795,000 for an upgrade of its plant, borrowing the money at 8.8%
> compounded daily for 6 years. McCabe is not required to make any payments to the lender until maturity,
> but is required to set up a sinking fund for the purpose of accumulating the loan's maturity value.
The amount owing in 6 years will be 795000 * (1 + .088/365)^(6*365)
Let that = F

> If they make quarterly deposits into an account earning 4%, how much should each payment be?
quarterly deposit = F * (.04/4) / [(1 + .04/4)^(6*4) - 1]
Click to expand...
 
Please share your work with us - so that we may know where to begin to help you.
 
But you said....

When I tried what you told me to do it didn't work. I just got a negative number.
Click to expand...

show us what you tried and how you got that negative number....
 
Ohh I tried this
795000 * (1 + .088/365)^(6*365)
Let that = F
I got 1347866.803
Then I put that number into this formula
F * (.04/4) / [(1 + .04/4)^(6*4) - 1]
so 1347866.803*9.04/4)/[(1+.04/4)^6*4)-1]
Then i got the same number negative. I don't know if i put it in the calculator wrong? or does this not even work?
 
We weren't taught to divide first.. so when i take this
1347866.803*9.04/4)/[(1+.04/4)^6*4)-1]
and switch it to
1347866.803[(1+.04/4)^6*4)/(.04/4)
it should get the same answer right?
 
stephtacularx said:
We weren't taught to divide first.. so when i take this
1347866.803*(.04/4)/[(1+.04/4)^(6*4)-1]
and switch it to
1347866.803[(1+.04/4)^(6*4)-1]/(.04/4)
it should get the same answer right?
Click to expand...
Well, your 1347866.803 is correct !

SO we have 1347866.803 TIMES (.04/4) DIVIDED BY [(1+.04/4)^24 - 1] : since 6*4 = 24 ; ok?

1347866.803 TIMES (.04/4) = 1347866.803 TIMES .01 = 13478.668

[(1+.04/4)^24 - 1] = (1+.01)^24 - 1 = 1.01^24 - 1 = 1.26973... - 1 = .26973...

13478.668 DIVIDED BY .26973 = 49970.109

Ya'll ok now?

As far as your question on multiplying or dividing first being same: NO!
ab / c is NOT same as ac / b
 
stephtacularx said:
We weren't taught to divide first.. so when i take this
1347866.803*9.04/4)/[(1+.04/4)^6*4)-1]
and switch it to
1347866.803[(1+.04/4)^6*4)/(.04/4) <<<< How's that??

it should get the same answer right?
Click to expand...

= F * (.04/4) / [(1 + .04/4)^(6*4) - 1]

= 1347866.803 * (.01) / [(1.01)^(24) - 1]

= 13478.66803/ [1.269734649 - 1]

= 13478.66803/ [0.269734649]

Now continue....
 
I don't know it's something called Sni. I can't make the little symbol thing on the computer. but its like (1+i)^n-1/i. That's what we were taught. The book we are using is called the mathematics of money.. but it should get the same answer right?
 
stephtacularx said:
I don't know it's something called Sni. I can't make the little symbol thing on the computer. but its like (1+i)^n-1/i. That's what we were taught. The book we are using is called the mathematics of money.. but it should get the same answer right?
Click to expand...
What's your point?
Your "(1+i)^n-1/i" is part of some financial equations, BUT needs another set of brackets: ((1+i)^n-1)/i
Be extra careful concerning brackets.
 
stephtacularx said:
Okay, so how would I use my equation to get the same answer you are getting? Is it even possible?
Click to expand...
Huh? What is / where is "your" equation ? :shock:

Btw, if you expect that we'll "match" your book's style: IMPOSSIBLE ... we can't see it :wink:
 
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