document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=214926>Question 214926</A>: <I><SPAN STYLE=\"word-break: break-all;\"> please help me solve this word equation:  You want to buy a car in 5 years, and estimate that you need about 20,000.  If the bank pays you 6% interest rate, how much do you need to put in the bank today?\r<BR>\n" );
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document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #162394 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=162394\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> The general formula is:<BR>\n" );
document.write( "PV(FA) = FA/(1+i)^n<BR>\n" );
document.write( "PV = present value<BR>\n" );
document.write( "FA = future amount<BR>\n" );
document.write( "i = interest rate per time period<BR>\n" );
document.write( "n = number of time periods<BR>\n" );
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document.write( "Assuming interest rate is compounded monthly, your time periods becomes months.<BR>\n" );
document.write( "You would need to divide your interest rate per year by 12 to get interest rate per month.<BR>\n" );
document.write( "You would need to multiply your number of years by 12 to get number of months.<BR>\n" );
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document.write( "FA is the future amount = $20,000<BR>\n" );
document.write( "i = interest rate per time period = interest rate per month = .06/12 = .005<BR>\n" );
document.write( "n is number of time periods = number of months = 5*12 = 60<BR>\n" );
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document.write( "PV(FA) = FA/(1+i)^n becomes:<BR>\n" );
document.write( "PV(FA) = 20000/(1.005)^60 = 14827.44392 = $14,827.44<BR>\n" );
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document.write( "If you were compounding your interest rate yearly, then i would be .06 and n would be 5.<BR>\n" );
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