 My Math Forum finance: compounds in payments,interest and value
 User Name Remember Me? Password

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

 April 3rd, 2014, 11:33 PM #1 Newbie   Joined: Apr 2014 From: mars Posts: 7 Thanks: 2 finance: compounds in payments,interest and value finance is not my strong point as are word problems. i'm infinitely confused as to which formula to use, basically where to start. please help me. Erin borrows $40,000 at 7% interest (per year) for purchasing assets which appreciate in value at 4% per year. Suppose Erin holds her assets, repaying the loan from her monthly income by constant monthly amounts. The loan is fully repaid at the end of fi ve years. Assume that the interest on the loan as well as the asset appreciation are compounded monthly. At the end of fi ve years, i. What were Erin's monthly payments? ii. How much did Erin pay in interest? iii. By what amount did Erin's assets increase in value? April 4th, 2014, 11:59 PM #2 Newbie Joined: Apr 2014 From: mars Posts: 7 Thanks: 2 Quote:  Originally Posted by looni Erin borrows$40,000 at 7% interest (per year) for purchasing assets which appreciate in value at 4% per year. Suppose Erin holds her assets, repaying the loan from her monthly income by constant monthly amounts. The loan is fully repaid at the end of fi ve years. Assume that the interest on the loan as well as the asset appreciation are compounded monthly. At the end of fi ve years, i. What were Erin's monthly payments? ii. How much did Erin pay in interest? iii. By what amount did Erin's assets increase in value?
okay I tried doing all three. please help me if I am wrong.

i. What were Erin's monthly payments?
PVIFA= 1-[(1+r)^-n]/r = (PV)40,000/(PVIFA)50.5020 = PMT $792.047 for monthly payments ii. How much did Erin pay in interest? PMT^n-PV=792.047^60-40,000=$7522.82 in interest?

iii: By what amount did Erin's assets increase in value?
(40,000*(1.04)^5)-40,000 = $8666.11 assets appreciated ***1.04=1+4(100) rate of appreciation*** April 6th, 2014, 08:08 AM #3 Math Team Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038 Quote:  Originally Posted by looni iii: By what amount did Erin's assets increase in value? (40,000*(1.04)^5)-40,000 =$8666.11 assets appreciated ***1.04=1+4(100) rate of appreciation***
Should be 40000 * (1 + .04/12)^60 - 40000
ANNUAL Rate of appreciation should be (1 + .04/12)^12 - 1

You're correct on the other 2 questions. April 6th, 2014, 09:12 PM   #4
Newbie

Joined: Apr 2014
From: mars

Posts: 7
Thanks: 2

Quote:
 Originally Posted by Denis Should be 40000 * (1 + .04/12)^60 - 40000 ANNUAL Rate of appreciation should be (1 + .04/12)^12 - 1 You're correct on the other 2 questions.

thank you. XD Tags compounds, finance, interest, payments Thread Tools Show Printable Version Email this Page Display Modes Linear Mode Switch to Hybrid Mode Switch to Threaded Mode Similar Threads Thread Thread Starter Forum Replies Last Post FlintheartGlomgold Calculus 3 April 3rd, 2014 11:31 PM grace25 Elementary Math 12 January 24th, 2013 08:46 PM aaron-math Economics 6 January 22nd, 2013 10:05 AM Russell368 Economics 3 July 7th, 2011 09:50 PM douglasrac Economics 0 February 17th, 2011 09:14 AM

 Contact - Home - Forums - Cryptocurrency Forum - Top

Copyright © 2019 My Math Forum. All rights reserved.      