You are saving money to buy a house in 10 years. You will need a total of $30,00

Question

You are saving money to buy a house in 10 years. You will need a total of $30,000 for the down payment and other initial costs. Starting from 1 year from now, you will make an annual deposit of $2, 500 to a savings account for 10 years. What should be the interest rate that will let you will meet the goal? Use the MATLAB function bisect that was developed during the lab. Use a stop criterion es = 0.0001. The following formula relates future worth F, annual payment A, number of years n, and interest rate i. F = A(1 + i)^n -1/i

Explanation / Answer

Code:

%create a script file with name f.m

function y=f(i)
y= 2500*(((1+i)^10)-1)/i;
end

% create another script file with the below code and run it.

a=0;
c=1;
b=(a+c)/2;
while (abs((30000-f(b))/30000) > 0.0001)
if((f(a)*f(b))<0)
c=b;
else
a=b;
end
b=(a+c)/2;   
end
b=100*b;
fprintf('the interest rate in percentage is %3.2f ',b);

result:

the interest rate in percentage is 3.99

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