Question

Suppose you can get an annual interest rate r (as a decimal). You want to save S dollars over N years. You will need to make a monthly deposit of Isabel can afford to save $95 per month. What interest rate will she need in order to have $8,500 in 6 years? Start with an interest rate of (too low). Use a while loop to increase the rate by until the desired output is reached (and stored in the variable ). Hint: Your code may look cleaner if you define M as an anonymous function before the while loop.

Answer 1

Answer:

What interest rate will she need in order to have $8,500 in 6 years?

rate 0.6% monthly

Explanation:

we want to know at which rate a monthly annuity of 95 dollars generates a future value of 8,500 in 6 years:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV$

C 95

time 72

PV $8,500.0000

$95 \times \frac{1-(1+r)^{-72} }{r} = PV$

We solve using excel seek goal function

on A1 we write any number value

then on any other cel we write:

we define =PV(A1,6,95)

then we click data --> seek goal

we want the PV cell to match 8,500 changing A1

rate 0.005925959