HOw much must sam invest at 8% compounded monthly in order to have $6500 at the end of 7 years and 9 months? [please also explain how to get the "n" value] thanx!
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A = P(1+r)^n with r & n adjusted for periodicity
here, r = 0.08/12 = 0.02/3, n = 12*7+9 = 93
6500 = P(1+0.02/3)^93
P = 6500/(1+0.02/3)^93 = $3503.84 <------
here, r = 0.08/12 = 0.02/3, n = 12*7+9 = 93
6500 = P(1+0.02/3)^93
P = 6500/(1+0.02/3)^93 = $3503.84 <------
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In the formula A = P(1 + r/n)^(m*n), n is the number of times per year that interest is paid, and m is the number of years. The product m*n is the number of times interest is paid in those m years.
7 years and 9 months = 7.75 years; 7.75*12 = 93, so there are 93 interest payments.
6500 = P(1 + .08/12)^93
6500/(1 + .08/12)^93 = P
3503.84 = P
7 years and 9 months = 7.75 years; 7.75*12 = 93, so there are 93 interest payments.
6500 = P(1 + .08/12)^93
6500/(1 + .08/12)^93 = P
3503.84 = P