My Math Forum Tricky compound interest problem

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

March 21st, 2017, 12:43 PM   #11
Senior Member

Joined: May 2008

Posts: 298
Thanks: 81

Beer soaked ramblings follow.
Quote:
 Originally Posted by dthiaw First step is to calculate how long it is going to take for the balance to reach 5000 at a 4% annually compounded rate With a financial calculator it is 4.445 years which will lead you to about August 10 1997 ( I may be off by a day or so). i chose a financial calculator to save time. Formulas here are not an issue. the math is easy Second step is to calculate the future value on March 1 1999 from August 10th 1997 at an annual compounded rate of 5.5%. That is going to be equal to 5,432.64 Third step is to subtract the 1,000 withdrawal which leads to a balance of 4,432.64 fourth step is to calculate how long it is going to take for the balance to reach 5,000 again at a rate of 4% since the balance is below 5,000. The answer is about 3.07 years Final step is to calculate the future value with the remaining 0.93 years and drumrolll answer is 5,255.27 Answer is off because of rounding but Cheers
Thanks for playing Sir dthiaw.
Nice to know there's a new math knight errant roaming around town.

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