[DcifrThs]

[ QUOTE ]
It's all related to the future value of your money....

FV($8000, 3 year, 50% interest) = 8000*(1.5)^3 = $27,000

The $500/month annuity is valued at:

FVAF($500/month, 36 months, %50/36 interest rate) =

(((1 + .5/12)^36 - 1) / .5/12)($500)

= $40169.52

so you end up with $67169.52

Thats the real anwser. Your teacher however is probably going to want to see something like this...

Year 1
---------
$8000 + $6000 = $14000 + 50% = $21000

Year 2
--------
$21000 + $6000 = $27000 + 50% = $40,500

Year 3
-------
$40,500 + $6000 = $46,500 + 50% = $69750


So, thank me for doing your home work by sending $10 to "Tickner" on pokerstars.

[/ QUOTE ]

i disagree...

inserting the function "future value" based on a monthly rate of 3.437% = (1+50%)^(1/12)-1, we get that after 36 monthly periods at 3.437% interest compounded monthly = $34,557.17... (i just tested this and there may be a small discrepancy here: manually calculating this for 36 months comes to $35,741.92 vs. the $34,557.17 FV calculates in excel...)

you can test this by taking (1+3.437)^(12) -1 = 50%. so the monthly return is definitely 3.4336608...%.

i'm also not 100% certain about splitting the two up and calculating them separately though they are mathematically similar. i've had champagne and thus may be a little off here...

so i did a quick simulation. starting with $8000 in month 1 (11/1/2007) and assuming that the first month there is no $500 contribution, the value after the first month is $8,275 = (1+3.437%)*8000

thereafter, the value from the previous month has $500 added to it (i.e. there are 35 total $500 contributions) and the return of 3.437% is applied to that...i.e. ($8275 + $500)*(1+3.437%)=$9076)

follwoing this through until october 2010 (36 months of compound returns later), we get that the value of this investment is $61,054.

that is the answer i'd go with.

Barron