Future worth, F, has to be found from a present amount, P, five years from now a
ID: 1143203 • Letter: F
Question
Future worth, F, has to be found from a present amount, P, five years from now at an interest rate of 12% per year, compounded daily A What interest rate must be used in the FIPfactor, (FIP,Po,n), when n is 5? The interest rate that must be used in the FP factor, (FP%,n), when n is 5 is L%. B what interest rate must be used in the RP factor, (FPA6,n), when n is 10? | The interest rate that must be used in the RP factor, (RP%,n), when n is 10 is-% c | what interest rate must be used in the FP factor, (FP&n), when n is 20? . The interest rate that must be used in the RP factor, (FPM,n), when n is 20 is L %.Explanation / Answer
ANSWER:
I = 12% PER YEAR COMPOUNDED DAILY.
no of days in a year = 365
effective interest rate = ( 1 + i / n) ^ n - 1
eir = ( 1 + 12% / 365) ^ 365 - 1
eir = (1 + 0.000329) ^ 365 - 1
eir = (1.000329) ^ 365 - 1
eir = 1.127475 - 1
eir = 0.127475 or 12.74% or 12.75% (upto 2 decimal places)
so i = 12.75%
a) when n is 5 , i = 12.75%
b) when n is 10 , i = 12.75%
c) when n is 20 , i = 12.75%
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