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September 4th, 2012, 11:05 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, 11:47 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:
Quote:
 
September 4th, 2012, 06:58 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, 07:14 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, 10:27 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, 06:49 AM  #6  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,955 Thanks: 988  Re: Basic financial math problems Quote:
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, 07:05 AM  #7  
Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 13,955 Thanks: 988  Re: Basic financial math problems Quote:
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, 07:37 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, 04:43 PM  #9  
Newbie Joined: Sep 2012 Posts: 6 Thanks: 0  Re: Basic financial math problems Quote:
when i write down the problem i come up with: 500=200a(2n) >> not knowing whether it is simple or compound, I cant really get the whole equation and I would have three unknowns > n,i, and what 700 becomes after 5n years. knowing that, I would not know how to solve it through algebra. if i go about it this way saying: A200(2n) = 500 or a(2n) = 2.5 with that I assume I could use: i[t1,t2]= [a(t2)  a(t1)] / a(t1) >> this being the effective interest rate with t2=2n and t1=0. problem is that this 'i' is only for that specific interval, and could not be used with any other different intervals. well at least that is what i think and that is where i am stumped. I don't know what else to use. what we have learned before he gave the assignment are the accumulation/amount functions of simple and compound interest, the one above and some others that were derived from those formulas.  

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