Pair#8 Castro & Raya

Transcript

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COLLABORATIVE EXERCISE #2

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Castro Raya Pair 8

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2. What is the (a) present value and (b) compound interest earned for 3 years and 9 months of P84,500 that is compounded quarterly at 20% interest?

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GIVEN:

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F= P 84,500 m=4 j=0.20 t=3.75 years P=?  Ic=?

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n= tm i= j/m n= 3.75(4) i= 0.20/4 n= 15 i= 0.05

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P= F (1+i)^-n                     Ic= F-P P= 84,500 (1+0.05)^-15   Ic= 84,500- 40,645.9448 P= 40,645.9448              Ic= 43,854.0552

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Solution:

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5. What is the effective rate equivalent to a nominal rate of 5% compounded semi-annually?

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GIVEN:

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j=0.05 m=2 w=?

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SOLUTION:

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w= (1+ j/m)^m -1 w= (1+ 0.05/2)^2   -1 w= 0.050625 w= 5.0625%

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THANK YOU!

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THANK YOU!