Hey,
I was wondering about the N value for finance solver
N is the total number of payments from the first exchange of money (ie. borrowing or investment of a principal) to the final exchange of money (ie. the transfer of the outstanding balance to whomever it is owed). Assuming that the number of compounding periods per year = number of payments per year, then N also gives the total number of compounding periods.
If an investment/whatever is compounding monthly (or other units), you times the yearly value by 12 right? This is what we were taught at school & what some of the examples in the cambridge further 3/4 textbook show
Yes, to find the balance of an asset after
y years, with monthly payments, then N will be y * 12.
however, I've encountered a few questions where the answers in the textbook were the 'year' value, not the actual 'month' value (they did not times the 'year' value by 12). I've shown them below:
(9G q7&8 )
7) Bree has $25 000 in an account that pays interest at a rate of 6.15% per annum compounding monthly.
a) If she makes monthly deposits of $120 to the account, how much will she have in the account at the end of 5 years?
b) If she makes monthly withdrawals of $120 from the account, how much will she have in the account at the end of 5 years?
For 7(a) I get the same answer as the textbook. Here are my tvm solver entries:
N = 5*12
I = 6.15
PV = 25000
Pmt = 120
FV = ?
PPY/CPY = 12
For (b), make Pmt = 120 and everything else the same, and I get the same answer as the textbook.
8 ) Jarrod saves $500 per month in an account that pays interest at a rate of 6% per annum, compounding monthly.
a) If he makes monthly deposits of $500 to the account, how much will he have in the account at the end of 10 years?
b) Suppose that, after 10 years of making deposits, Jarrod starts withdrawing $500 each month from the account. How much will he have in the account at the end of another 10 years?
Again, I got the same answers as the textbook. For (a), my tvm solver entries were:
N = 10*12
I = 6
PV = 0
Pmt = 500
FV = ?
PPY/CPY = 12
For (b), my tvm solver entries were:
PV = answer from (a)
Pmt = 500
Everything else the same as (a).
Would the answers be the textbook's wrong and be a fluke or have I been learning incorrect content? :s
Thanks!
I don't think you have misunderstood the content. Perhaps you have misunderstood these particular questions, or you have used incorrect tvm entries.