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 Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

 September 4th, 2012, 10:05 AM #1 Newbie   Joined: Sep 2012 Posts: 6 Thanks: 0 Basic financial math problems Here are a couple questions that are baffling me right now, please help... the questions are as they appear 1. The sum of the present value of $1 paid at the end of 'n' periods and$1 paid at the end of '2n' periods is 1. Find (1+i)^(2n) 2.If $200 grows to$500 over 2n years, what will $700 grow to over 5n years? This is only the beginning of the class, all we learned are some basic so basic concepts only if please. I would greatly appreciate solutions but if you want to give me clues that will get me started, please do so. Thanks September 4th, 2012, 10:47 AM #2 Global Moderator Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Basic financial math problems Quote:  Originally Posted by cmple 1. The sum of the present value of$1 paid at the end of 'n' periods and $1 paid at the end of '2n' periods is 1. Find (1+i)^(2n) Let x = (1+i)^n. Then you have a quadratic equation in x to solve. You're asked to find x^2. Quote:  Originally Posted by cmple 2.If$200 grows to $500 over 2n years, what will$700 grow to over 5n years?
Let x = (1+i)^n. Then you have a quadratic equation in x to solve. You're asked to find x^5. September 4th, 2012, 05:58 PM #3 Newbie   Joined: Sep 2012 Posts: 6 Thanks: 0 Re: Basic financial math problems thanks for the response, but I'm as clueless as I was before. September 5th, 2012, 06:14 AM #4 Global Moderator   Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Basic financial math problems I'm sorry to hear that. What don't you understand? September 5th, 2012, 09:27 AM #5 Newbie   Joined: Sep 2012 Posts: 6 Thanks: 0 Re: Basic financial math problems basically the whole method is what I don't understand. I tried to think about what you gave me but nothing clicked. one of my classmates said that he did not need to use any sort of fin math formula so I tried doing it just through basic math and could noy get anywhere... September 6th, 2012, 05:49 AM   #6
Math Team

Joined: Oct 2011
From: Ottawa Ontario, Canada

Posts: 14,597
Thanks: 1038

Re: Basic financial math problems

Quote:
 Originally Posted by cmple Here's a couple questions that are baffling me right now, please help...the questions are as they appear: 1. The sum of the present value of $1 paid at end of 'n' periods and$1 paid at end of '2n' periods is 1. Find (1+i)^(2n) 2.If $200 grows to$500 over 2n years, what will $700 grow to over 5n years? This is only the beginning of the class, all we learned are some basic so basic concepts only if please. I would greatly appreciate solutions but if you want to give me clues that will get me started, please do so. Thanks Well, you're not telling us WHAT you learned. Were these problems given to you by your teacher? If so, are you saying your teacher did not teach properly? If question#2 was worded this way (make n=5) :$200 grows to $500 over 10 years. At the same interest rate, what will$700 grow to over 25 years?
Are you able to handle that? September 6th, 2012, 06:05 AM   #7
Math Team

Joined: Oct 2011
From: Ottawa Ontario, Canada

Posts: 14,597
Thanks: 1038

Re: Basic financial math problems

Quote:
 Originally Posted by cmple one of my classmates said that he did not need to use any sort of fin math formula ...
If that classmate jumped in the lake, would you jump too?....get my drift?

The ONLY way I can see not needing fin math formulas is in #2,
and ONLY if the interest is truly SIMPLE interest;
like $200 to$500 over 2 years means interest of $150 per year; no compounding. September 6th, 2012, 06:37 AM #8 Global Moderator Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Basic financial math problems You can certainly get it with basic algebra not using financial/exponential calculations. But if you know how to solve it with exponentials that's fine too. Do what you have to. September 6th, 2012, 03:43 PM #9 Newbie Joined: Sep 2012 Posts: 6 Thanks: 0 Re: Basic financial math problems Quote: Originally Posted by Denis Quote:  Originally Posted by cmple Here's a couple questions that are baffling me right now, please help...the questions are as they appear: 1. The sum of the present value of$1 paid at end of 'n' periods and $1 paid at end of '2n' periods is 1. Find (1+i)^(2n) 2.If$200 grows to $500 over 2n years, what will$700 grow to over 5n years? This is only the beginning of the class, all we learned are some basic so basic concepts only if please. I would greatly appreciate solutions but if you want to give me clues that will get me started, please do so. Thanks
Well, you're not telling us WHAT you learned.
Were these problems given to you by your teacher?
If so, are you saying your teacher did not teach properly?

If question#2 was worded this way (make n=5) :
$200 grows to$500 over 10 years.

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,

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# finance math

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