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    lauralschade's Avatar
    lauralschade Posts: 2, Reputation: 1
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    #1

    Apr 2, 2011, 09:58 PM
    if a $11,000 machine is charged 11% interest over 3 years what is the final cost?
    how much money you will need to invest today in a certificate of deposit (CD), earning 5 percent interest, per annum to have $13,000 for the replacement of your dishmachine in next three years. For this option you will need to calculate the present value amount of $13,000 on an investment that earns 5% per year for three years.
    eawoodall's Avatar
    eawoodall Posts: 230, Reputation: 5
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    #2

    Apr 2, 2011, 11:34 PM
    11000 times 1.11 for 3 years
    11000 (1.11)^3
    11000 (1.11)(1.11)(1.11)
    12210 (1.11) (1.11)
    13553.1 (1.11)
    15043.941
    as an actual money amount would be 15043.94

    second question:
    someday three years later equals 13000, you get 5% a year.
    x(1 + 5/100)^3 = 13000
    x(1.05)^3 = 13000.
    x = 13000/(1.05).
    x = 13000/(1 + 1/20)^3.
    x = 13000/ (20/20 +1/20)^3
    x = 13000/ (21/20)^3.
    x = 13000/ (21^3/20^3).
    x = (20)(20)(20)13000/((21)(21)(21)).
    x = (20)(20)260000 / (21)441.
    x = (20)5200000/ 9261.
    x = 104000000/ 9261.
    x = 1129.89 we have to round to dollars and cents because it is an actual physical amount of money.
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