3. 9% compounded quarterly is equal to The semi-annual effective rate is: A) 9.10%. B) 9.31%. C) 9.20%.
4. solution... Suppose you pay interest @ 9 % compounded quarterly, it means you are paying 9/4% every quarter and interest is added in the principal every time. Suppose you start with 100. After 1 st quarter, 100 will become : (100+2.25) = 102.25 after 2 nd quarter = (102.25 *1.0225) = 104.55 thus on semi-annual basis we are getting interest of 4.55 or 9.1% p.a. Semi annually compounding Answer
5. What is the annual effective rate, if there is continous compounding rate of 9% ? Formula of rate = e^(rate) - 1 =(2.71828)^(.09) -1 = rate is 9.417% answer
6. I invest Rs. 1000 every year from today onwards for 10 years. Rate of interest is 8%. Calculate future value of annuity ? Formula = amt (((1+rate)^n – 1) / rate ) =1000(((1.08^10)-1)/.08) =14486.56 but here I am starting my investment from today, so this first instalment, the interest will also be added : 14486.56 * 1.08 =15645.48 answer
7. What is log? Here we use shortcuts to exponentials for speedy calculations. logarithm of a number to a given base is the power or exponent to which the base must be raised in order to produce that number. For example, the logarithm of 1000 to base 10 is 3 it can be written as : log 10 1000 = 3 usually we use the base of 10, so we can write : log 1000 = 3