Question

a) Money is invested at 12.30% p.a. compounded quarterly for 22 months.

What is the numerical value of CY?

b) What principal value will grow to $4334 if invested for 6 years at 7.04% p.a. compounded annually? State your answer indollars ($) with two decimals.

c)Money is invested at 3.51% p.a. compounded semi-annually for 5 years and 8 months.

What is the numerical value of n? State your answer with 6 decimals.

Answer 1

a.Numerical value of CY= 12 months/4 quarters =3

22 months= 22/4=5.5 quarters

so, 12.3%p.a.=12.3%/4= 3.075% per quarter

so it is (1+3.075%)^5.5 qrtrs-1= 18.1254% for the 22 mths.

b.Amount=Principal *(1+r)^n

ie.4334=Principal*(1+7.04%)^6

Principal=4334/(1+7.04%)^6=

2881.46

(Answer)

c.Interest rate per annum= 3.51%

ie. 3.51%/2=1.755% per semi-annual period

5 yrs. 8 mths.=(5*2)+(8/6)=

11.333333

semi-annual periods

ie. No.of times, the above semi-annual interest is compounded

so,numerical value of n=11.333333 semi-annual periods (ANSWER)

to explain further:

an amount of $ 1 will become

(1*(1+1.755%)^11.333333)

1.217957

at end of 5 yrs. & 8 mths. At this rate of 3.51% p.a.