investing

Read the following instructions in order to complete this discussion, and review the example of how to complete the math required for this assignment:

1. Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, or something else. Pick something which cost somewhere between $2000 and $50,000.
2. On page 270 of Elementary and Intermediate Algebra you will find the “Present Value Formula,” which computes how much money you need to start with now to achieve a desired monetary goal. Assume you will find an investment which promises somewhere between 5% and 10% interest on your money and you want to purchase your desired item in 12 years. (Remember that the higher the return, usually the riskier the investment, so think carefully before deciding on the interest rate.)
3. State the following in your discussion: 

• The desired item
• How much it will cost in 12 years
• The interest rate you have chosen to go with from part b

• Power
• Reciprocal 
• Negative exponent 
• Position 
• Rules of exponents

Your initial post should be 150-250 words in length. Respond to at least two of your classmates’ posts by Day 7 in at least a paragraph. Do you agree with how they used the vocabulary? Do their answers make sense?

Carefully review the Grading Rubric for the criteria that will be used to evaluate your discussion

responce 1:Keyante Sykes

My wife and I would like to save money for our 3 year old daughter’s college fund. Our goal is to save $25,000 in the next 12 years to jump start our daughter’s college funds so that she can go to any college she chooses without having to worry about loans. A fellow veteran told us about an investment that has an average return on 7%. My wife and I agree that this will be a great investment for our daughter’s college fund. Now we are trying to decide how much we need to invest now to reach our goal in 12 years. To determine that amount we will used the present value formula to determine how much we need to invest now to have $25,000 in 12 years. The present value formula is

P=A(1+r)^-n

P=25000(1+.07)^-12  I substituted the known values into the equation

P=25000(1.07)^-12    I added the values I parentheses first according to the order of operations

P=25000/(1.07)^12    Since the value have a power of a negative number (-12), the negative exponent creates the reciprocal of the base number. The rules of exponents states that when there is a negative exponent the base will change its position, in this case drop to the denominator.

P=25000/2.2522     The exponent is applied to the base number

P= 11,100.26

This answer means that my wife and I need to invest $11,100 today to have $25,000 in 12 years for our daughter’s college fund. The present value looks very similar to the simple interest formula. Both formulas use the same variables and have similar setups. The simple interest formula have an understood exponent of 1. The present value formals has a negative exponent for the power. 

responce 2:Katherine Krug-Kelley

Week 4 Discussion: Investing

I have always wanted a newer car and have never had the drive it takes to invest into anything long enough to achieve my goal. So, after doing some research and seeing that I can make an investment and gain an average of 6% interest on it every year, I have decided to do so. I am going to need around $20,000. to get a newer car in 12 years, so I need to figure out how much money to invest now to achieve this goal by my 12-year deadline.

My desired item is a newer car.

The cost of a newer car should be around $20,000. in 12 years.

 The average interest rate of my investment is 6% annually.

The Present Value Formula is P = A (1 + r)-n with P being the present value that will amount to A dollars in n years at interest rate r compounded annually.

There is a negative exponent of -n on the quantity raised to a power. And so, per the rules of exponents, this means that the base quantity will change position by dropping down into the denominator where it will raise to the power of n once the negative is out into effect. A is then divided in the equation.

P = A(1+r)-n                             This is the present value formula.

P = 20000(1+.06)-12               Here my numbers are plugged into the formula.

P = 20000(1.06)-12                 Working inside parentheses first.

P =   20000                              Base number changes position here to configure interest after the

(1.06)12                            negative exponent creates the reciprocal of the base number and

becomes positive.   

P =   20000                              The exponent is applied to the base number here.

       2.012196…

P = 9,939.39                            This will be my initial investment, or P using the formula.

With hopes my investment stays at 6% annually, I can safely start my investment with $10,000. now. Adding a small amount of money to my initial investment will help to insure inflation costs are covered.

This is a new kind of formula for me to work with. However, I felt as though I made good use of it.