saving for downpayment: compounded weekly at 8.75%, or....

[fatherneedshelp]

PLEASE>>>>>>> help me help my son with this

here are the problems:

You want to purchase a home in 9 years. You figure that you need a down payment of at least $30,000.00 You find an excellent interest rate for the 9 year period at 8.75%. that is compounded weekly How much will you need to invest to have your down payment in 9 years?

(2) If the bank offered an 9% continuously compounded rate if you leave your investment untouched for twelve years, how much would you need to invest in that case?

I never did this math so Im no help to my son. If you could show step by step that would be great. He needs to know how to get the answer, not just the answer. He has a test tomorrow. Need help ASAP!! Thank you, a stressed out dad!

 

[skeeter]

Re: PLEASE>>>>>>> help me help my son w

here are the problems:
You want to purchase a home in 9 years. You figure that you need a down payment of at least $30,000.00 You find an excellent interest rate for the 9 year period at 8.75%. that is compounded weekly How much will you need to invest to have your down payment in 9 years?

this is a straight-up plug and chug problem using a formula which your son should have already seen in class ...

A = P[1 + (r/n)]^nt
where A = account balance
P = initial investment
r = interest rate as a decimal
n = number of compounding periods in a year
t = number of years

since you are solving for the initial investment P ...

P = A/[1 + (r/n)]^nt

(2) If the bank offered an 9% continuously compounded rate if you leave your investment untouched for twelve years, how much would you need to invest in that case?

for continuous compounding, the formula is ...

A = Pe^rt ... same variables as before. your son should know what "e" represents.

P = A/e^rt = Ae^-rt

I never did this math so Im no help to my son. If you could show step by step that would be great. He needs to know how to get the answer, not just the answer. He has a test tomorrow. Need help ASAP!! Thank you, a stressed out dad!

 

[fatherneedshelp]

He tried this formula but not working, he must be doing something wrong......Can you show the numbers and the final answer so he can be sure he is doing it right?
thanks, mike

 

[Deleted member 4993]

He tried this formula but not working, he must be doing something wrong......Can you show the numbers and the final answer so he can be sure he is doing it right?
thanks, mike

If he shows us his work - we can help to figure out where he is making the mistake.

We need to see some effort on your son's part.