For you Math guys...

I don't know what class this is for, but I learned how to solve problems like that in one of my Computer Science classes, its called a linear homogeneous recurrence of degree k with constant coefficients...

Let Pn denote the amount in the RRSP after n years..

We can derive the following recurrence relation:

Pn = Pn-1 + .12Pn-1 = 1.12Pn-1

The initial condition is P = 5000

Then we have:

Pn = 1.12Pn-1 = (1.12)^nP0

We now have a formula to calculate Pn for any natural number n and can avoid the iteration.

So... P46 = (1.12)^46 * 5000 = 918330

Take 30% of that and you have 275499, subtract it from the above solution and you end up with... $642,831.00

Hope I'm right and hope that helped. //content.invisioncic.com/y282845/emoticons/smile.gif.1ebc41e1811405b213edfc4622c41e27.gif

 
1 last thing, someone in my class said my formula on paper should look something like this by how we were taught it: y=5000 (.12)^46 before subtracting the 30%. That formula isn't working for me or something tho... Is that right? I know before subtracting the 30% it should come out in a y=a(b)^x formula.

btw, I got more questions that are stumping me. I can post them if you want haha Thanks a lot for the help guys.

 
lol so basically this is algebra math? im doing it right now in school too, just stick to the formulas and youre good to go

It gets quite a bit more complicated. It is terribly difficult to get EXACTLY 12% per year for 46 years. Sometimes it would be stupid. In the early 80s, inflation was over 12% (or quite close) and you would actually be losing money. It gets more fun when the rates change over time.

 
You started correct but ended incorrectly, unless I misunderstood the question. Most of the time you don't assume that you pay taxes each year, but perhaps in this problem you might. But you would only be taxed on the interest.
I misread the question & thought it was seeking the amount of the resultant tax.

 
1 last thing, someone in my class said my formula on paper should look something like this by how we were taught it: y=5000 (.12)^46 before subtracting the 30%. That formula isn't working for me or something tho... Is that right? I know before subtracting the 30% it should come out in a y=a(b)^x formula.

btw, I got more questions that are stumping me. I can post them if you want haha Thanks a lot for the help guys.


It should be 1.12 not .12

 
1 last thing, someone in my class said my formula on paper should look something like this by how we were taught it: y=5000 (.12)^46 before subtracting the 30%. That formula isn't working for me or something tho... Is that right? I know before subtracting the 30% it should come out in a y=a(b)^x formula.

btw, I got more questions that are stumping me. I can post them if you want haha Thanks a lot for the help guys.
Should be y = 5000(1+.12)^46

 
1 last thing, someone in my class said my formula on paper should look something like this by how we were taught it: y=5000 (.12)^46 before subtracting the 30%. That formula isn't working for me or something tho... Is that right? I know before subtracting the 30% it should come out in a y=a(b)^x formula.

btw, I got more questions that are stumping me. I can post them if you want haha Thanks a lot for the help guys.

It's because 5000(.12) is like saying they take away 88 percent every year...

You want 5000(1.12) meaning they add 12 percent every year.

 
haha I'll give you my next 1... 2 more at the most haha... I think I can do this one, but I'm better off getting a pro to do it haha...

here they go:

"Suppose instead of putting your money into an RRSP, you invest in stock outside of an RRSP. You still deposited $5000.00 for 46 years making an average annual rate of return of 12%. The difference is that you had to pay 30% tax on the interest made every year to the government. How much do you have to spend at the end of 46 years?"

and Q2:

"Compare the amount of money you have after saving INSIDE an RRSP vs. having saved OUTSIDE the RRSP."

 
yeah, business law *****...but not as much as my calculus or stats 2 test tomorrow.
busniness law... must really be shitty if you're doing my work over that.

haha, but I'm going to be on my way to a law degree. Just gotta get the mathematic requirements out of the way first. My biggest problem I have.

 
haha I'll give you my next 1... 2 more at the most haha... I think I can do this one, but I'm better off getting a pro to do it haha...
here they go:

"Suppose instead of putting your money into an RRSP, you invest in stock outside of an RRSP. You still deposited $5000.00 for 46 years making an average annual rate of return of 12%. The difference is that you had to pay 30% tax on the interest made every year to the government. How much do you have to spend at the end of 46 years?"

and Q2:

"Compare the amount of money you have after saving INSIDE an RRSP vs. having saved OUTSIDE the RRSP."

I haven't ever encountered such a problem as in this question but this is how I would approach it. You are only getting 70% or the 12%, therefore a interest rate of 8.4%. However, something tells me this may not be correct. Your future value under this assumption is 204,322.87.

918330.58-204322.87 = 438508.54

 
I haven't ever encountered such a problem as in this question but this is how I would approach it. You are only getting 70% or the 12%, therefore a interest rate of 8.4%. However, something tells me this may not be correct. Your future value under this assumption is 204,322.87.
918330.58-204322.87 = 438508.54
I did the same thing,

=5000(1+.12(.7))^46

but that number seems kinda low. Not sure if it's correct.

 
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