M

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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!