Question

Khloe has a savings account that earns 3.13% compounded monthly. If she has $2,378 in the account today, what will the account balance be in 11 years?

$2,447.13
$2,452.43
$3,337.70
$3,353.86

Answer 1

@jim_thompson5910 @phi

Answer 2

Use

FV = PV*(1+r/n)^(n*t)

where

FV = unknown
PV = 2378
r = 0.0313
n = 12 (compounded 12 times a year)
t = 11 years

Answer 3

any luck? Jim wrote it out (like setting the dinner table. Now serve the dinner), that is put in the numbers. You will want to use a calculator.

Answer 4

Xavier deposits $6 daily into an interest-bearing account to save for renovations to his bathroom. The account earns 4.57% which compounds annually. What is the present value of the investment if Xavier renovates his bathroom in five years?

$11,785.32
$10,033.83
$7,843.83
$9,595.32
@jim_thompson5910

Answer 5

are you familiar with annuities at all?

Answer 6

yes

Answer 7

But I am not sure whether to use PVOA or PVAD

Answer 8

PVOA = present value of ordinary annuity
PVAD = present value of annuity due

Answer 9

they're basically the same but the annuity due is where the payment is made at the beginning of the period (eg: rent)

Answer 10

Yeah I know what they are but I am not which one to use in this scneario

Answer 11

in this case, you use PVOA because the payment is made at the end of the period

Answer 12

oh ok

Answer 13

So I am trying to figure out how would I plug in the values

Answer 14

Because Xavier is depositing 6 dollars daily

Answer 15

hint: assume 365 days in a year

(6 dollars per day) * (365 days per year) = 6*365 = 2190 dollars per year

Answer 16

if the payment frequency doesn't match with the compounding frequency, that is your first goal: to get them to line up somehow

Answer 17

so instead of thinking "6 dollars per day", think "2190 dollars per year" because the money is compounded annually

Answer 18

would that be then used as the C in the equation

Answer 19

yeah that's the cash flow C

Answer 20

then the interest rate would be 0.0457/12 right?

Answer 21

and 12 would be n right?

Answer 22

the /12 part is only if you compound montly

Answer 23

but we're actually compounding annually

Answer 24

so????

Answer 25

what formula are you using again? can you draw it out?