I answered a question about interest, did in my head, and then just simple math on the calculator this a.m.(I haven't even had my morning coffee and the left side of my brain hurts when I do math)
The question was basically "How much interest do you need to earn in 5 years to turn $10,200 into $15,000 compounded annually. I guestimated over 9% and just simple calculator shows a return of $4845 at 9.5% but there are two answers that specifically stated the rate to be 8.0185187%. How did they arrive at this figure? And why can't I remember how to use the calculator to calculate this? I've really neglected the left side of my brain but there is over 1% discrepancy. Help, please. Thanks. And you can view the question in my posts, near the top of the answers.
2006-08-03 04:02:25 · 1 answers · asked by -Tequila17 6 in Science & Mathematics ➔ Mathematics
I dont have my financial calculator with me so I did it in excel.
I ran into some difficulty using the rate() and pmt() functions since the rate as well as the payment were both unknowns. Perhaps I wasnt using the right function.
But I set up a simple series of interest calculations for years 1-5 and set the interest rate equal to 8%. Then I used the solver function in excel to vary the interest rate in such a way as to make the cell with money at end of year 5 = 15000.
Maybe not the solution you were looking for but I did verify their answer.
2006-08-03 09:58:32 · answer #1 · answered by Will 4 · 0⤊ 1⤋