Help with what seems a basic question... (1 Viewer)

[toby12]

Hey guys everything i do for this question seems to be wrong, so im just wondering if the answer given may be incorrect.. anyway the question is 'Find the value at the end of 7 years of an annuity of $125 paid at the end of each month, interest compounded monthly at 0.5% per month'

 

[boxhunter91]

Hey guys everything i do for this question seems to be wrong, so im just wondering if the answer given may be incorrect.. anyway the question is 'Find the value at the end of 7 years of an annuity of $125 paid at the end of each month, interest compounded monthly at 0.5% per month'

Did you times the number of payments by 12 ie 7*12 =84
.: 125(1.005)^84

 

[toby12]

yeah i did that :S can you do all the working out and give an answer for me please? lol

 

[PC]

'Find the value at the end of 7 years of an annuity of $125 paid at the end of each month, interest compounded monthly at 0.5% per month'

Remember that the interest is compounded monthly, so everything needs to be done in months.

r = 0.5% per month = 0.005
n = 7 years = 84 months

A = M[(1+r)ⁿ–1 / r]
= 125 x [(1+0.005)⁸⁴–1 / 0.005]
= 125 x [(1.005)⁸⁴–1 / 0.005]
= 125 x [(1.005)⁸⁴–1 / 0.005]
= $13 009.24

 

[toby12]

so how did you get the 0.005?

 

[xxheersaletixx]

because its a rate at 0.5 % .... like PERCENTAGE u have to divide it by 100so 0.5/100 = 0.005=]

 

[toby12]

ah of course, wow im away with fairies tonight.. im looking at everything in the most stupidest way. thanks guys