Question

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 11% Annually un Quarterly Semiannually 2. In a present value of an annuity of 1 table: (Round answers to 1 decimal place, s. 458.58.1.) Frequency of Annual Rate Number of Years Invested Number of Rents Involved (a) Rate of interest b) Number of Periods Rents 11% Annually 10% Semiannually Quarterly 12%

Answer 1

Requirement 1:

	Annual Rate	Number of Years Invested	Compounded	(a) Rate of Interest	(b) Number of Periods
a	11%	11	Annually	11%	11
b	8%	5	Quarterly	2%	20
c	8%	16	Semi-annually	4%	32

Explanations:

i.Rate of interest

	Annual Rate	/	No. of times compounded per year	=	Rate of interest
a	11%	/	1	=	11%
b	8%	/	4	=	2%
c	8%	/	2	=	4%

ii. Number of periods

	Number of years	x	No. of times compounded per year	=	Number of periods
a	11	x	1	=	11
b	5	x	4	=	20
c	16	x	2	=	32

Requirement 2:

	Annual Rate	Number of Years Invested	Number of Rents involved	Frequency of rents	(a) Rate of Interest	(b) Number of Periods
a	11%	27	27	Annually	11%	27
b	10%	14	28	Semi-annually	5%	28
c	12%	8	32	Quarterly	3%	32

Explanation:

i. Rate of interest

	Annual Rate	/	No. of times compounded per year	=	Rate of interest
a	11%	/	1	=	11%
b	10%	/	2	=	5%
c	12%	/	4	=	3%

ii. Number of periods

	Number of years	x	No. of times compounded per year	=	Number of periods
a	27	x	1	=	27
b	14	x	2	=	28
c	8	x	4	=	32