Investment and Interest Calculation
Initial Investment
The desired item is jewelry
The cost in 12 years will be about $6000.
The average interest rate is 5%.
The Present value formula is P =A (1+r)-n where P is the present value that will amount to A dollars in n years at interest rate r compounded annually.
Note that the quantity raised to a power has the negative exponent on –n. According to the rules of exponents, this means that once the negative is put into effect, the base quantity will change position by dropping down into the denominator where it will be raised to the power on n. Then it will divide A instead of multiplying A as it seems to be doing now.
P=A(1+r)-n
P= 6000(1+.05)-12 The relevant numbers are plugged into the formula
P = 6000(1.05)-12 Added inside the parenthesis
P = 6000 The negative exponent creates the reciprocal of the base number. (1.05)12 (in other words, changes its position from up top to down below)
P = 6000 The exponent is applied to the base number 1.7958
P = 3341.02 This is value of P using the formula
Given the results and the fluctuating interest rate at 5%, I will invest $3000 right now. This should give me a little cushion. The formula shows your investment changing over time depending on the interest rate. If I draw a graph it will increase over time. If the interest rate changes over time it will affect the
The desired item is jewelry
The cost in 12 years will be about $6000.
The average interest rate is 5%.
The Present value formula is P =A (1+r)-n where P is the present value that will amount to A dollars in n years at interest rate r compounded annually.
Note that the quantity raised to a power has the negative exponent on –n. According to the rules of exponents, this means that once the negative is put into effect, the base quantity will change position by dropping down into the denominator where it will be raised to the power on n. Then it will divide A instead of multiplying A as it seems to be doing now.
P=A(1+r)-n
P= 6000(1+.05)-12 The relevant numbers are plugged into the formula
P = 6000(1.05)-12 Added inside the parenthesis
P = 6000 The negative exponent creates the reciprocal of the base number. (1.05)12 (in other words, changes its position from up top to down below)
P = 6000 The exponent is applied to the base number 1.7958
P = 3341.02 This is value of P using the formula
Given the results and the fluctuating interest rate at 5%, I will invest $3000 right now. This should give me a little cushion. The formula shows your investment changing over time depending on the interest rate. If I draw a graph it will increase over time. If the interest rate changes over time it will affect the