Read the following instructions in order to complete this assignment and review the example of how to complete the math required for this assignment:
Discussion Week 4
Read the following instructions in order to complete this discussion, and review the example of how to complete the math required for this assignment:
Your initial post should be 150-250 words in length. Respond to at least two of your classmates’ posts by Day 7. Do you agree with how they used the vocabulary? Do their answers make sense?
INSTRUCTOR GUIDANCE EXAMPLE: Week Four Discussion
My best friend and her new husband (Fred and Ethel) just got back from their honeymoon which was a trip down the River Nile in Egypt. They are excited about traveling together as a couple and they want to start saving for a very special trip. My own 25
th wedding anniversary falls in the same month as Fred and Ethel’s 12th anniversary and they thought it would be fun to plan a trip together. They have done a little research enough to realize we will need about $8,000 per couple set aside for this trip. Fred also found an investment opportunity which promises to have an average return of about 9% per year if one invests long term. We need to know how much each couple needs to invest now to reach their goal in time.
The desired item is travel.
The cost in 12 years will be about $8,000.
The average interest rate of the investment is 9%.
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.
Notice that the quantity raised to a
power has the negative exponent of –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 of n. Then it will divide A instead of multiplying A as it seems to be doing now.
P = A(1 + r)
P = 8000(1 + .09)
-12 Here are the relevant numbers are plugged into the formula
P = 8000(1.09)
-12 Add inside the parenthesis
P = 8000 The
negative exponent creates the reciprocal of the base number
12 (in other words, changes its position from up top to down below)
P = 8000 The exponent is applied to the base number
P = 2844.28 This is the value of P using the formula.
Given these results and knowing the interest rate may not stay exactly at 9% we will begin our investment with $3000 right now to begin to save for our big twenty-fifth (and twelfth) anniversary trip. This should give us a little cushion for inflation and such
Lab for Week 5.
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