Question

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.		11%		11		Annually			%
b.		12%		8		Quarterly			%
c.		12%		16		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%		29		29		Annually			%
b.		8%		14		28		Semiannually			%
c.		8%		8		32		Quarterly			%

Answer 1

(1)

(a)

rate of interest column = 11%,

number of periods = 11

(b)

rate of interest column = 12%/4 = 3%

number of periods = 8 x 4 = 32

(c)

rate of interest column = 12%/2 = 6%

number of period = 16 x 2 = 32

(2)

(a)

rate of interest column = 10%

number of periods = 29

(b)

rate of interest column = 8%/2 = 4%

number of periods = 14 x 2 = 28

(c)

rate of interest column = 8%/4 = 2%

number of period = 8 x 4 = 32