Question

5.

(Please if you are not willing to answer the question completely, leave the question to someone who will!)

a. How long will it take for $ 500 to amount to $ 700, if you invest in the 8% compound quarterly?

b. A debt of $ 600 that must be paid within three years and another of $ 800 payable in four years, will be settled by means of a payment within two years. If the interest rate is 8% compounded semiannually, how much is the payment?

Answer 1

a	Present value		=	$500
	Future value		=	$700
	Interest rate componded quarterly		=	8%
	Quarters required :-
		Future value   =    Present value* (1+r/100)
		700	=	500*(1+8/100)
			=	4.36 periods/quarters
		:- 1 period = 1 quarter
b	Debt value	=	600
	Repayment period	=	2 years
	Compound semi annually	=	8%
	So future value will be to be paid	=	600*(1+8/100)(1+8/100)(1+8/100)(1+8/100)
	payment	=	816.2934
	Debt value	=	800
	Repayment period	=	2 years
	Compound semi annually	=	8%
	So future value will be to be paid	=	800*(1+8/100)(1+8/100)(1+8/100)(1+8/100)
	payment	=	1088.391
	Total payments	=	1904.685