Please help me with this real life situation... Thank you in advance.
Q1-If I deposit $8293.58 in a savings account on the first of every month for 12 months at 5.5% interest, how much money will I have at the end of 12 months.
Q-2 If I leave that total in the bank for 9 more years without investing anymore, what interest rate would I have to earn to have a balance of $170,000 at the end of the additional 9 years.
2007-02-07 09:11:06 · 5 answers · asked by Big D 4 in Business & Finance ➔ Investing
Is there a formula(s) or factor(s) that can hepl me solve this question in the future?
2007-02-07 09:20:20 · update #1
Q-1 At end of month one $8293.58 +( $8293.58 X 5.5 %) /12
$8293.58 + 38.01 = $8331.59
At end of month 2 $8293.58 + $8331.59 + ( $16,625.17 X 5.5%)/12 = $16,625.17 + 76.20 = $16,701.37
carry on doing that til you are at the end of month 12.
Q-2 subtract final answer of Q-1 from $170,000 to get amount of interest needed over 9 year period.
Look up interest amortization tables to get interest rate that corresponds to time and interest amount.
2007-02-07 09:39:57 · answer #1 · answered by bob shark 7 · 0⤊ 0⤋
In order to answer the question, you need to ask the bank about the frequency of compounding. In the answer, monthly compounding was used. The formula is: $8293.58(1+(0.055/12))^12 for the first month, $8293.58(1+(0.055/12))^11 for the second month and so forth, then add them up for the total. After one year it will be $102,538.31 and the interest rate needed to have 170,000 after 9 years is 5.78%. This interest rate assumes that the money is compounded annually. This rate is what the bank will quote you as (APY) annual percentage yield.
EBoudames
2007-02-07 10:21:47 · answer #2 · answered by boudames 1 · 0⤊ 0⤋
The answer depends on whether you're talking about simple interest or compound interest.
If you have that kind of money to invest I would recommend you go into your banking institution and sit down with a financial advisor, who can walk you through the numbers using actual real life scenarios with the various investment products they offer, and this will be the best way to ensure you achieve your goals. Just watch out for recurring fees, like annual maintenance fees, etc., to make sure they are not skimming excessively off your deposits. Small costs are OK and normal, you just don't want to get ripped off in the process of investing your money.
2007-02-07 09:26:37 · answer #3 · answered by soulfire_7_7_7 3 · 0⤊ 0⤋
My sister in-law is a loan officer unfortunately she is not around so I can show her this question and help you out, I think that your looking for is a mortgage amortization, I found this form in the microsoft webpage that might help you.
http://office.microsoft.com/en-us/templates/TC010566201033.aspx?pid=CT101172751033
2007-02-07 09:32:07 · answer #4 · answered by dann_y2k 3 · 0⤊ 0⤋
Q1: $102,538.32 (assuming monthly compounding)
Q2: 5.63% (assuming monthly compounding)
Using a financial calculator
2007-02-07 10:09:50 · answer #5 · answered by SmittyJ 3 · 0⤊ 0⤋