ET 350 Paga 1 20 Points Total Class Exercise 3 Open Notes Only (Show your work T
ID: 2923140 • Letter: E
Question
ET 350 Paga 1 20 Points Total Class Exercise 3 Open Notes Only (Show your work TVM Diagrams where Applicable) Given a nominal interest rate of 11.5% per year, (Compounded Quartny calculate the effective interest rate.(2pts) Given a nominal interest rate of 10.75% per year, (Compounded calculate the effective interest rate(2pts) Daily) Given a nominal interest rate of 12% per year, (continuously compounded) calculate the effective interest rate (2pts) 4 Given, from Problem 1) a Present Value of $10,00, calculate the future worth Givert, after 13 Years. ( 2pts) Given, from Problem 2) a present value of $15,000, calculate the future worth after 25 Years ( 2pts) 5 6 Given, from Problem 3) A future Value of $50,000 after 9 Years find the Present Worth (2pts)Explanation / Answer
Effective rate r = (1 + i/n)n - 1
1. i = 0.115 n = 4
=> r = (1 + 0.115/4)4 - 1
= 0.12 = 12%.
2. i = 10.75 n = 365
=> r = (1 + 0.1075/365)365 - 1
= 0.1135 or 11.35%.
3. i = 0.12
For continuously compounding, formula is
r = ei - 1
= e0.12 - 1
= 0.1275
= 12.75%.
4. P = 10000 t = 13 r = 0.12 n = 4
Amount A = P (1 + r/n)nt
= 10000 * (1 + 0.12/4)52
= $46508.86.
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