Jeff deposits 150 into a fund today and 215 ten years later. Interest for the first 7 years is
credited at a nominal discount rate of d compounded quarterly, and thereafter at a nominal
interest rate of 8% compounded semiannually. The accumulated balance in the fund at the end of
15 years is 740. Calculate d.
Solution
Present Value 150Present Value150Future Value at the end of 15 years740Let Interest Rate for
First 7 YeardInterest Rate For Next 3 Year8% Compounding semi annuallyWe Can calculate \'d\'
by applying following formula :FvPV*(1+PIF)^n 740
=(150*(1+d*3/12)^28)*(1+8%*6/12)^16 740 =(150*(1+d*3/12)^28)*1.87
740/1.87
=(150*(1+d*3/12)^28)395.72(150*(1+d*3/12)^28)2.64(1+d*3/12)^28)1.04(1+d*3/12)d0.16d =
16% p.a. compunding Quarterly.
Jeff deposits 150 into a fund today and 215 ten years later. Interest.pdf
1. Jeff deposits 150 into a fund today and 215 ten years later. Interest for the first 7 years is
credited at a nominal discount rate of d compounded quarterly, and thereafter at a nominal
interest rate of 8% compounded semiannually. The accumulated balance in the fund at the end of
15 years is 740. Calculate d.
Solution
Present Value 150Present Value150Future Value at the end of 15 years740Let Interest Rate for
First 7 YeardInterest Rate For Next 3 Year8% Compounding semi annuallyWe Can calculate 'd'
by applying following formula :FvPV*(1+PIF)^n 740
=(150*(1+d*3/12)^28)*(1+8%*6/12)^16 740 =(150*(1+d*3/12)^28)*1.87
740/1.87
=(150*(1+d*3/12)^28)395.72(150*(1+d*3/12)^28)2.64(1+d*3/12)^28)1.04(1+d*3/12)d0.16d =
16% p.a. compunding Quarterly
