Finance word problem help, please?
You have $1,225 in a savings account which earns 8.4% compounded monthly and $1,300 in an account which earns 6% compounded monthly. How many years will it be until the two accounts have the same value if you do not withdraw any money?
I have a financial calculator. I know I’m solving for the rates and comparing them somehow. This reminds me of the math problems about the trains going different speeds, meeting at “x”. Sigh…
2 yrs 6 mths
Simply use your spreadsheet with format as follows:
Column A is number of months. Number 1 is given to the first month the saving accounts get their interest.
Column B is accumulated account for $1,225 with compounded 8.4% monthly. The formula is (B1+(B1*8.4%/12), where B1 representing $1,225.
Column C is accumulated account for $1,300 with compounded 6% monthly. The formula is same with column B except the interest rate.
Column D is variance from cell C – cell B.
Then drag your tabel into number 30 and you’ll find the variance (Column D) will close to zero. Means it will need 30 months until the two accounts have the same value if you do not withdraw any money.
A Handy Tool: Retirement Calculator