Exercise 6-1 Annual Rate Number of Years Invested Compounded (a) Rate of Interes
ID: 2395067 • Letter: E
Question
Exercise 6-1
Annual Rate
Number of Years Invested
Compounded
(a) Rate of Interest
(b) Number of Periods
%
%
%
Annual Rate
Number of Years Invested
Number of Rents Involved
Frequency of Rents
(a) Rate of Interest
(b) Number of Periods
%
%
%
Exercise 6-1
For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table:
Annual Rate
Number of Years Invested
Compounded
(a) Rate of Interest
(b) Number of Periods
a. 10% 11 Annually%
b. 8% 7 Quarterly%
c. 8% 17 Semiannually%
2. In a present value of an annuity of 1 table:
Annual Rate
Number of Years Invested
Number of Rents Involved
Frequency of Rents
(a) Rate of Interest
(b) Number of Periods
a. 10% 28 28 Annually%
b. 10% 15 30 Semiannually%
c. 12% 7 28 Quarterly%
Explanation / Answer
Answers
In a future value of 1 table:
Annual Rate
Number of Years Invested
Compounded
(a) Rate of Interest
(b) Number of Periods
a.
10%
11
Annually
10% [10% x (12months/12months)]
11 [11 x 1]
b.
8%
7
Quarterly [4 quarters annually]
2% [8% x (1 quarter/4quarter)]
28 [7 x 4]
c.
8%
17
Semi annually [semi annual = 6 months]
4% [8% x (6 months/12 months)]
34 [17 x 2] or [17 x 12/6]
In a present value of an annuity of 1 table:
Annual Rate
Number of Years Invested
Number of Rents Involved
Frequency of Rents
(a) Rate of Interest
(b) Number of Periods
a.
10%
28
28
Annually
10% [10% x 12/12]
28
b.
10%
15
30
Semi annually [semi annual = 6 months]
5% [10% x 6/12]
30
c.
12%
7
28
Quarterly [4 quarters annually]
3% [12% x ¼]
28
In a future value of 1 table:
Annual Rate
Number of Years Invested
Compounded
(a) Rate of Interest
(b) Number of Periods
a.
10%
11
Annually
10% [10% x (12months/12months)]
11 [11 x 1]
b.
8%
7
Quarterly [4 quarters annually]
2% [8% x (1 quarter/4quarter)]
28 [7 x 4]
c.
8%
17
Semi annually [semi annual = 6 months]
4% [8% x (6 months/12 months)]
34 [17 x 2] or [17 x 12/6]