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Solving for variable.

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Hello good people: I'm having difficulty getting the right answer for i in the following equation. I get a different answer every time! Please help so I can see where I went wrong. Thank you very much.
-5,000 * ((1 - (1 + i)^-40) / i) + 1,307,997.74 * ((1 + i)^-40) - 100,000 =0, solve for i

Jul 29, 2018

1+0 Answers

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Well, young person!! The reason you are getting different answers is because there is NO DIRECT solution to your equation!!. I can readily see that this a combined financial equation for a future value of \$1,307,997.74, a present value of \$100,000, a periodic payment of \$5,000 and 40 periods, which appear to be "years". You can only solve for "i" using iteration, or trial and error method. You can easily solve it by using a dedicated financial calculator, if you have one.

Go online and use this financial calculator: https://arachnoid.com/finance/

1- Enter \$100,000 as negative under "pv"

2- Enter \$5,000 as negative under "pmt"

3-Enter 40 under "np"

4- Try any interest rate and enter it under "ir"

5- Press "fv" and compare the amount to your \$1,307,997.74

6- Change the interest rate in "4" above until you get as close as possible to "fv" of \$1,307,997.74.

Note: I tried it on your behalf and got 5%, which gives the exact "fv" of \$1,307,997.74 !!!.

Jul 29, 2018

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