Pair 12 FDNBUSM Collaborative Exercise 2

LM

- 00:08
- Number 3
- 00:09
- If a certain principal is doubled in 16 years, what is the interest rate compounded quarterly at which it is invested?
- 00:16
- GIVEN:
- 00:18
- m=4 t=16
- 00:20
- REQUIRED:
- 00:21
- j=?
- 00:23
- FORMULA:
- 00:24
- n=tm
- 00:25
- j=[( ) -1]m
- 00:25
- F
- 00:25
- _
- 00:25
- P
- 00:29
- SOLUTION:
- 00:30
- Let P=15,000 and F=30,000
- 00:32
- n=tm n=16(4) n=64
- 00:33
- 1
- 00:33
- j=[( ) -1]4
- 00:33
- _
- 00:33
- n
- 00:33
- 30000
- 00:33
- 15000
- 00:34
- _____
- 00:34
- 64
- 00:34
- __
- 00:34
- 1
- 00:35
- FINAL ANSWER
- 00:37
- =0.0436 =4.36%
- 00:43
- Number 5
- 00:43
- What is the effective rate equivalent to a nominal rate of 5% compounded semi-annually?
- 00:48
- GIVEN:
- 00:50
- j=0.05 or 5%, m=2
- 00:53
- REQUIRED:
- 00:55
- w=?
- 00:56
- FORMULA:
- 00:58
- (1+ ) -1
- 00:59
- j
- 00:59
- _
- 00:59
- m
- 00:59
- m
- 01:01
- SOLUTION:
- 01:04
- (1+ ) -1
- 01:04
- ___
- 01:04
- 0.05
- 01:04
- 2
- 01:04
- 2
- 01:07
- FINAL ANSWER
- 01:08
- =0.0506 =5.06%