Simple Interest

Interest (Amount) I Formulas I = p.r.t

Principal (Present Value) p p = I / r.t
Rate of Interest r r = I / p.t
Time t t = I / p.r

8.1 > 1.Madison won a prize amount of $1500 and she deposited the entire amount into a savings account at a local bank. How
was 3% p.a.?

Interest (Amount) I
Principal (Present Value) p $1,500.00
Rate of Interest r 3% 0.03
Time t 3years

I = p.r.t
I = 1500*0.03*3
I = $135.00

8.1 > 2. Owen lent Hua $5000 at 5% p.a. simple interest for 1.5 years. Calculate the amount of interest charged at the end of the

Interest (Amount) I
Principal (Present Value) p $5,000.00
Rate of Interest r 5% 0.05
Time t 1.5years

I = p.r.t
I = 5000*0.05*1.5
I = $375.00

8.1 > 3. Lisa invested $6000 in a savings account at a simple interest rate for 2 years. If the interest rate was 1.5% higher than tha

Interest (Amount) I
Principal (Present Value) p $6,000.00
Rate of Interest r 1.5% 0.015
Time t 2years

I = p.r.t
I = 6000*0.015*2
I = $180.00

8.1 > 15. Afsoon invested $9500 for 320 days at 8% p.a. How much more or less interest would he have earned on the investmen

1
Interest (Amount) I Interest (Amount)
Principal (Present Value) p $9,500.00 Principal (Present Value)
Rate of Interest r 8% p.a r1 0.08 Rate of Interest
 Time t 320days 320/365 0.876712329

r1 I = p.r.t r2 I = p.r.t
I = 9500*0.08*(320/365) I = 9500*0.09*(320/365)
I = $666.30 I= $749.59
I= 749.59-666.30
I= 83.29

8.1 > 19. Babiya borrowed a total of $3250 to pay for college fees. $2000 of this was from a bank at 6.25% p.a. and the remainde
after 9 months for both the loans.
1
Interest (Amount) I Interest (Amount)
Principal (Present Value) p $2,000.00 Principal (Present Value)
Rate of Interest r 6.25% p..a. 0.0625 Rate of Interest
Time t 9months 9/12 0.75

I = p.r.t
I = 2000*0.0625*0.75
I = $93.75
I= 93.75+101.25
I= $195.00

Assigment 1
1. Joseph loaned $6,500 to Megan at a simple interest rate of 4.72% p.a. for 2 years and 11 months. Calculate the amount of inte

Interest (Amount) I?
Principal (Present Value) p $6,500.00
Rate of Interest r 4.72% p.a 0.0472
Time t 2years 11months 35months 35/12 2.916666667

I = p.r.t
I = 6500*0.0472*(35/12)
I = $894.83

2. Joseph received a loan at 2% p.a. simple interest for 10 months. If she was charged an interest of $183.33 at the end of the pe

Interest (Amount) I $183.33

Principal (Present Value) p ?
Rate of Interest r 2% p.a 0.02
Time t 10months 10/12 0.833333333

p = I / r.t
p = 183.33/(0.02*(10/12))
p = $10,999.80

3. Megan was charged interest of $63 for a loan amount of $3,400 that she borrowed for 120 days. What annual rate of simple in
 Interest (Amount) I $63.00
Principal (Present Value) p $3,400.00
Rate of Interest r
Time t 120days 120/365 0.328767123

I = p.r.t
r = I / p.t
r = 63/(3400*(120/365))
r = 0.06
r = 5.64

4. Juliana invested $3,450 at a rate of 6.25% p.a. simple interest. How many days will it take for her investment to grow to $3,570

Interest (Amount) I $3,570-$3,450 $120.00

Principal (Present Value) p $3,450.00
Rate of Interest r 6.25% p.a 0.0625 0.000171233
Time t

I = p.r.t
t = I / p.r
t = 120/(3450*(0.0625/365))
t = 203.130434782609

4. (3) Juliana invested $3,050 at a rate of 5.50% p.a. simple interest. How many days will it take for her investment to grow to $3,

Interest (Amount) I $120.00 $3,170-$3,050

Principal (Present Value) p $3,050.00
Rate of Interest r 5.5% p.a 0.055 0.000150685 daily
Time t ?

I = p.r.t
t = I / p.r
t = 120/(3050*(0.055/365))
t = 261.102831594635

5. Evan borrowed $6,650 at 8.00% p.a. simple interest. How long did she take to repay the loan if she was charged interest of $25

Interest (Amount) I $250.00

Principal (Present Value) p $6,650.00
Rate of Interest r 8% p.a 0.08 0.000219178
Time t

I = p.r.t
t = I / r.t
t = 250/(6650*(0.08/365))
t = 172
6. Diana lent $6,200 at 3.00% p.a. on March 15, 2014. Calculate the amount of interest she would receive on May 24, 2014.

Interest (Amount) I
Principal (Present Value) p $6,200.00
Rate of Interest r 3% p.a 0.03
Time t 3/15/2014 5/24/2014 70 70/365

I = p.r.t
I = 6200*0.03*(70/365)
I = $35.67

7. $4,200 is invested today in 7-month term deposit that has an interest rate of 2.5% p.a. At the end of the 7 months, the maturit
interest rate of 3.9% p.a. What is the maturity value at the end of the second term deposit?
1 Today to 7month
Interest (Amount) I ? Interest (Amount)
Principal (Present Value) p $4,200.00 Principal (Present Value)
Rate of Interest r 2.5% p.a 0.025 Rate of Interest
Time t 7months 7/12 0.583333333 Time

I = p.r.t I = p.r.t
I = 4200*0.025*(7/12) I=
I = $61.25 I=

s= p+I
s=
s=
savings account at a local bank. How much interest would she have earned after 3 years if interest on the savings account

of interest charged at the end of the term.

nterest rate was 1.5% higher than that offered by the savings account, how much more interest would she have earned?

uld he have earned on the investment if his money was growing at an interest rate of 0.75% p.m. instead of 8% p.a.?

2
Interest (Amount) I
Principal (Present Value) p $9,500.00
Rate of Interest r 0.75% p.m r2 0.0075 0.0075*12 0.09 p.a.
 Time t 320days 320/365 0.876712329

bank at 6.25% p.a. and the remainder from a credit union at 0.9% p.m. Calculate the total interest she should have paid

2
Interest (Amount)
Principal (Present Value) $1,250.00 $3,250.00
Rate of Interest 0.9% p.m 0.009 0.009*12 0.108 p.a
Time 9months 9/12 0.75

I = p.r.t
I = 1250*0.108*0.75
I= $101.25

months. Calculate the amount of interest charged at the end of the term.

years

erest of $183.33 at the end of the period, what was the principal amount of the loan?

0 days. What annual rate of simple interest was charged?

for her investment to grow to $3,570?

ke for her investment to grow to $3,170?

oan if she was charged interest of $250.

would receive on May 24, 2014.

0.191780822

the end of the 7 months, the maturity value of the first term deposit is re-invested into a 4-month term deposit at an

2 7month to 11month (4months additionals)

I ?
p $4,200+$61.25 $4,261.25
r 3.90% 0.039
t 4months 4/12 0.333333333

4261*0.039*(4/12)
55.393

$4,261+55.393
$4,316.39
Maturity Value (Future Value)
Interest (Amount) I Formulas s=p+I
Principal (Present Value) p I=s-p
Rate of Interest r p=s-I
Time t s = p ( 1 + r.t)
Maturity Value (Future Value) s p = s / (1 + r.t)
p = s . (1+ r.t)^-1

2. On March 3, 2019, Heather received a loan at 8% p.a. simple interest. She settled the loan on December 16, 2019. If she was
calculate the principal amount of the loan. (Ans. $6653.66)

Interest (Amount) I $420

Principal (Present Value) p ?
Rate of Interest r 8% 0.0008
Time t 2019/03/3 to 2288 days 0.7890411

p = I / r.t
p = $665,364.58

3.Lydia borrowed $7400 at 7.35% p.a. simple interest. How many months did she take to repay the loan if she was charged an in

Interest (Amount) I $317.25

Principal (Present Value) p $7,400.00
Rate of Interest r 7.35% 0.0735
Time t

t = I / p.r
t = 0.58 years
t = 212.90 days

4. Morgan received a loan of $10,000 from his friend. If he was charged interest of $218.75 at the end of seven months, calculate

Interest (Amount) I $218.75

Principal (Present Value) p $10,000.00
Rate of Interest r ?
Time t 7 months 0.583 years Time given in month (7months) = to find divided b

r = I / p.t
r = 0.0375
r = 3.75

5. Karl invested his savings in a short-term fund that was offering a simple interest rate of 4% p.a. Calculate the principal amount
the period if the maturity value of the investment at the end of 320 days was $20,720. (Ans. P=$20,018 & I=$702)

Interest (Amount) I ?
 Principal (Present Value) p ?
Rate of Interest r 4% p.a. 0.04
Time t 320 days 0.876712329
Maturity Value (Future Value) s $20,720.00

p = s / (1 + r.t)
p = 20720/(1+(0.04*(320/365)))
p = $20,018.00

I=s-p
I = 20720-20018
I = 702

8.2 > 3.Chelsea invested her savings in an account at 2.5% p.a. simple interest for 9 months. If she earned an interest of $37.5
amount of the investment?

Interest (Amount) I $37.50

Principal (Present Value) p?
Rate of Interest r 2.5% p.a 0.025
Time t 9months 9/12 0.75 years

p = I / r.t
p = 37.50/(0.025*0.75)
p= $2,000.00

8.2 > 7. Sandra invested a certain amount at 4% p.a. and another $6000 at 4.2% p.a. After 18 months, the total interest from b
that was invested at 4% p.a.
1 $6.000 at 4.2% p.a
Interest (Amount) I Interest (Amount)
Principal (Present Value) p $6,000.00 Principal (Present Value)
Rate of Interest r 4.2% p.a 0.042 Rate of Interest
Time t 18months 18/12 1.5 years Time
Maturity Value (Future Value) s?

s = p ( 1 + r.t) p = I / r.t
s = 6000*(1+(0.042*1.5)) p=
s= $6,378.00 p=

I=s-p
I = $6,378-$6,000
I = $378.00 Of 2nd inversion of $6,000 at 4.2%

I = I2 - I1
I = $1,098-$378
I= $720.00
Assigment 2
1. Karl invested his savings in a short-term fund that was offering a simple interest rate of 4% p.a. The maturity value of the inv
Calculate the principal amount invested. b. Calculate the interest earned during the period.

Interest (Amount) I?
Principal (Present Value) p?
Rate of Interest r 4% p.a 0.04
Time t 310days 310/365 0.8493151 years
Maturity Value (Future Value) s $31,967.30

p = s / (1 + r.t)
p = 31967.30/(1+(0.04*(310/365)))
a. p = $30,916.97

I=s-p
I = $31,967.30 - $30,916.67
b. I = $1,050.63

2. Leah's investment in his savings account matured to $4,504.21 at the end of 215 days. If the account was earning simple int
What was Leah's initial investment? b. How much interest did Leah earn?

Interest (Amount) I?
Principal (Present Value) p?
Rate of Interest r 2.70% p.a 0.027
Time t 215days 215/365 0.5890411 years
Maturity Value (Future Value) s $4,504.21

p = s / (1 + r.t)
p = 4504.21/(1+(0.027*(215/365)))
a. p = $4,433.70

I=s-p
I = $4,504.21-$4,433.70
b. I = $70.51
ecember 16, 2019. If she was charged interest of $420,

oan if she was charged an interest of $317.25? (Ans. t= 213 days)

nd of seven months, calculate the annual rate of simple interest on the loan. (Ans. r=3.75%)

7months) = to find divided by in month (12months)

alculate the principal amount invested and the interest earned during
018 & I=$702)
earned an interest of $37.50 at the end of the term, what was the principal

ths, the total interest from both investments was $1098. Calculate the amount

I $720.00
p?
r 4% p.a 4%/1 0.04
t 18months 18/12 1.5 years

720/(0.04*1.5)
$12,000.00 Amount that was invested at 4% p.a.
The maturity value of the investment at the end of 310 days was $31,967.30. a.

ount was earning simple interest at a rate of 2.70% p.a., answer the following. a.
Equivalent Payments
Equivalent value (i.e) is the value of the money on the dew date when the due is changed

Interest (Amount) I Formulas If the rescheduled date of a payment is after (in the futur
Principal (Present Value) p date, it is similar to moving money in the forward direction
Rate of Interest r Due date = P >Future date> Rescheduled date = S (find)
Time t s = p (1+rt)
Maturity Value (Future Value) s If the rescheduled date of a payment is before (anticipate
the due date, it is similar to moving money in the reverse d
Rescheduled date = P
p = s / (1 + rt)
p = s (1 + rt) ^-1

1.Calculate
a. Originalequivalent
scheduledvalue of the $6500
Payments: payments
dueon rescheduled
1 year ago date.
Rescheduled payment date: 9 months from now
Rate of interest: 4.25% p.a. (Ans. $6983.44)

Principal (Present Value) p 6500

Rate of Interest r 4.25 0.0425
Time t 9 months 9/12 0.75 1.75
Maturity Value (Future Value) s?
If the rescheduled date of a paym
s = 6500*(1+(0.0425*1.75))) date, it is similar to moving mone
s = $6,983.44 Due date = P >Future date> Resc
b. Original scheduled Payments: $12,000 due on June 4, 2021 s = p (1+rt)
Rescheduled payment date: Jan. 4, 2020
Rate of interest: 4.75% p.a. (Ans. $11214.95)

Principal (Present Value) p

Rate of Interest r 4.75 0.0475
Time t 6/4/2021 1/4/2020 517 days 517/365
Maturity Value (Future Value) s $12,000.00

p = s / (1 + rt) If the rescheduled date of a paym

p = 12000 / (1+(0.0475*(517/365))) value)) the due date, it is similar
p = $11,243.53 date = S < Rescheduled date = P
p = s / (1 + rt)
p = s (1 + rt) ^-1 p = s (1 + rt) ^-1
p = 12000*(1+(0.0475*(517/365)))^-1
p = $11,243.53

8.3 Excersice #15

A payment of $4500 was due three years ago and another payment of $2750 is due in four years. Determine the single payment
interest rate of 13.2% p.a, and use 2years from now as the focal date

1 3 years ago
 Principal (Present Value) p 4500 $4,500.00
Rate of Interest r 13.2 0.132
Time t 3years ago +2years = 5years
Maturity Value (Future Value) s?
If the rescheduled date of a payment is after (i
s = p (1+rt) date, it is similar to moving money in the forwa
s = 4500*(1+(0.132*5)) Due date = P >Future date> Rescheduled date
s = $7,470.00 s = p (1+rt)

2
Principal (Present Value) p?
Rate of Interest r 13.2 0.132
Time t 4years but it will anticipate 2years and the focal date is in 2years = 2years
Maturity Value (Future Value) s $2,750.00

p = s / (1 + rt) If the rescheduled date of a payment is before

p = 2750/(1+(0.132*2) the due date, it is similar to moving money in t
p = $2,175.63 Rescheduled date = P
p = s / (1 + rt)
s+p $9,645.63 p = s (1 + rt) ^-1

8.3 Excercise #25

Mee was supposed to pay $1350 that was due 150 days ago and is supposed to pay $450 that is due in 30 days to clear a loan t
$1000 today and the balance in 60 days. Calculate the amount that she would have to pay in 60 days if the interest rate charged

1
Principal (Present Value) p $1,350.00 150 days
Rate of Interest r9 0.09 $1,350.00
Time t 150days + 60days = 210days 210/365 0.57534247 years
Maturity Value (Future Value) s?

s = p (1+rt)
s = 1350*(1+(0.09*0.573542))
s = $1,419.69

2
Principal (Present Value) p 450
Rate of Interest r9 0.09
Time t 30days 30/365 0.0821918
Maturity Value (Future Value) s?

s = p (1+rt)
s = 450*(1+(0.09*0.082192))
s = $453.33

1+2 $1,873.01 Today

3 $1,000.00
 Principal (Present Value) p $1,000.00 p3
Rate of Interest r9 0.09
Time t 60 days 60/365 0.1643836 Se saca s3 por que hay que desco
Maturity Value (Future Value) s?

s = p (1+rt)
s = 1000*(1+(0.09*0.164384))
s = $1,014.79

1+2 $1,873.01
(1+2)-3 1873.01-1014.79
R/ $858.22

8.3 Excercise #27

$2400 due two months ago but not paid and $1600 due in four months are to be replaced by a payment of $3000 in two month
payment if the interest rate is 4.25% p.a. and the agreed focal date is five months from now

1
Principal (Present Value) p $2,400.00 2months
Rate of Interest r 4.25 0.0425 $2,400.00
Time t 7 months 7/12 0.5833333 p1
Maturity Value (Future Value) s?

s = p (1+rt)
s = 2400*(1+(0.0425*0.583333))
s = $2,459.50
2
Principal (Present Value) p $1,600.00
Rate of Interest r 4.25 0.0425
Time t 1month 1/12 0.0833333
Maturity Value (Future Value) s?

s = p (1+rt)
s = 1600*(1+(0.0425*0.083333))
s = $1,605.67

3
Principal (Present Value) p $3,000.00
Rate of Interest r 4.25 0.0425
Time t 3months 3/12 0.25
Maturity Value (Future Value) s?

s = p (1+rt)
s = 3000*(1+(0.0425*0.25))
s = $3,031.88

s= (s1+s2)-s3
 s= (2459+1605)-3031
s= $1,033.00

8.3 > 13. Sabir planned to make the following two investments: $7500 in 5 months at 10.8% p.a. and $5000 in 7 mont 6.5% p.a. C
months. Use 15 months from now as the focal date
1. p1 $7.500 today to 5month
Interest (Amount) I Interest (Amount)
Principal (Present Value) p $7,500.00 Principal (Present Value)
Rate of Interest r 10.8% p.a 0.108 Rate of Interest
Time t 10months 10/12 0.83 years Time
Maturity Value (Future Value) s? Maturity Value (Future Value)

s = p ( 1 + r.t) s = p ( 1 + r.t)
s = 7500*(1+(0.108*(10/12)))
s = $8,175.00
R/ $13,391.67

8.3 > 19. Philip has two outstanding payments for a loan that he gave his friend: $7300, due two months ago, and another paym
make one single payment in five months that would be equivalent to both these payments, what should be the size of the paym
five months from now as the focal date.
1. $7,300 due two month ago to 5month = >7months
Principal (Present Value) p $7,300.00 Principal (Present Value)
Rate of Interest r 3% p.a 0.03 Rate of Interest
Time t 7months 7/12 0.5833333 Time
Maturity Value (Future Value) s? Maturity Value (Future Value)

s = p (1+rt) p = s / (1 + rt)
s = 7300*(1+(0.03*(7/12)))
s = $7,427.75

R/ $9,214.35 Payment in the month 5

Assigment 2
3. Debt payments of $2,750 and $1,600 are due in six months and eight months, respectively. What single payment is required to
rate of 5.80% p.a. and use one month from now as the focal date.
1. $2,750 due to 6months to 1month(focal) =<5months
Principal (Present Value) p ? Principal (Present Value)
Rate of Interest r 5.80% p.a 0.058 Rate of Interest
Time t 5months 6 (due date)-1(pay5 0.41666667
Maturity Value (Future Value) s $2,750.00 Maturity Value (Future Value)

p = s / (1 + rt)
p = 2750/(1+(0.058*(5/12)))
p = $2,685.11

R/ $4,232.75 Payment in the month 1

4. Benjamin currently owes $11,000 to a friend who is charging him interest of 2.00% p.m. He is required to settle the loan with t
Calculate the size of the payments using five months as the focal date.

Principal (Present Value) p $11,000

Rate of Interest r 2.00% p.m 0.02 Today
Time t 5months x
Maturity Value (Future Value) s? s2

s1 s = p (1+rt)
s = 11000*(1+(0.02*5))
s = $12,100.00

s2=s1+x
12100 = x(1+(0.02*5))+x 1.1
12100 = 1.1x+(1)x
12100 = 2.1x
12100/2.1 = 2.1x / 2.1
12100/2.1 = x
$5,761.90 = x Equal payments (today and in 4months)

5. Evan had to make a payment of $2,300 in 11 months and $2,950 in 18 months, to a raw material supplier. What single paymen
simple interest rate of 4.25% p.a. and use 5 months from now as the focal date.
1. $2.300 in 11month to 5month(focal) =<6month
Principal (Present Value) p ? Principal (Present Value)
Rate of Interest r 4.25% p.a 0.0425 Rate of Interest
Time t 6months 6/12 0.5
Maturity Value (Future Value) s $2,300.00 Maturity Value (Future Value)

p = s / (1 + rt)
p = 2300/(1+(0.0425*(6/12)))
p = $2,252.14

R/ $5,072.30 Single playment in 5months to settle both

6. Stephen owes $11,000 to a friend who is charging him a simple interest rate of 1.70% p.m. He is required to settle the amount
six months. What is the size of the payments using today as the focal date?

Principal (Present Value) p $11,000.00 Today

Rate of Interest r 1.70%pm 0.017 x
Time t 6months s2
Maturity Value (Future Value) s?

s = p (1+rt)
s = 11000*(1+(0.017*6))
s = $12,122.00

s2 = s1+x
 12122 = x(1+0.017*6)) 1.102
12122 = 1.102x+x
12122 = 2.102x
12122 / 2.102 = 2.102x / 2.102
12122 / 2.102 = x
$5,766.89 = x Equal payments (today and in 6months)

7. Belinda borrowed $23,500 at simple interest rate of 3.40% p.a. from her parents to start a business. At the end of 2 months, sh
much would she have to pay them at the end of 15 months to clear the balance? Use 'now' as the focal date.

Principal (Present Value) p $23,500.00

Rate of Interest r 3.40% p.a 0.034
Time t Focal date = Now
Maturity Value (Future Value) s ?

p1 Payment $3,800 (2month)

p = s / (1 + rt)
p = 3800/(1+(0.034*(2/12)))
p = $3,778.59

p2 Payment $2,900 (5month)

p = s / (1 + rt)
p = 2900/(1+0.034*(5/12))
p = $2,859.49

p3 = p-(p1 + p2)
p3 =23500-(3778.59+2859)
p3 =$16,862.41 Present value (to focal date = today) of the balance after payment 1 and

s3
s = p (1+rt)
s = 16862*(1+(0.034*(15/12)))
s = $17,578.64 Balance and payment in the 15month
of a payment is after (in the future = find S (future value)) the due
ng money in the forward direction (left to right)
ate> Rescheduled date = S (find)

of a payment is before (anticipated payment = find P (present value))

to moving money in the reverse direction (right to left). Due date = S <

If the rescheduled date of a payment is after (in the future = find S (future value)) the due
date, it is similar to moving money in the forward direction (left to right)
Due date = P >Future date> Rescheduled date = S (find)
s = p (1+rt)

1.41643836 years

If the rescheduled date of a payment is before (anticipated payment = find P (present

value)) the due date, it is similar to moving money in the reverse direction (right to left). Due
date = S < Rescheduled date = P
p = s / (1 + rt)
p = s (1 + rt) ^-1

ars. Determine the single payment that will settle both payments in two years. Asumme an

Focal date
Today Payment 4 years
 2 years $2,750.00

duled date of a payment is after (in the future = find S (future value)) the due
milar to moving money in the forward direction (left to right)
P >Future date> Rescheduled date = S (find)

2years = 2years

duled date of a payment is before (anticipated payment = find P (present value))

, it is similar to moving money in the reverse direction (right to left). Due date = S <
date = P

is due in 30 days to clear a loan that she borrowed from Yan. Instead, Mee promised to pay
0 days if the interest rate charged is 9% p.a. and the agreed focal date is 60 days from now.
30 days
Focal date
Today 30 days 60 days
$1,000.00 $450.00 Balance

60 days
t3 = 60days
 s3

Se saca s3 por que hay que descontar el interes de los $1.000 pagados por anticipado hoy y restarlos frente al s1 y s2

a payment of $3000 in two months from now and a final payment in five months. Find the final

Payment Focal date = Final Date of Payment

Today 2months 4months 5months
$3,000.00 $1,600.00 Balance
7months s1
p2 1month s2 s1(debt 1)+s2(debt 1)=s3(payment)+x
p3 3months s3 (s1+s2)-s3
 a. and $5000 in 7 mont 6.5% p.a. Calculate the maturity value of both investments in 15

2. $5,000 7month to 15month

I
p $5,000.00
r 6.5% p.a 0.065
t 8months 8/12 0.6666667
s?

s = p ( 1 + r.t)
s = 5000*(1+(0.065*(8/12)))
s= $5,216.67

wo months ago, and another payment of $1800, due in eight months. If his friend promises to
hat should be the size of the payment? Assume that money earns 3% p.a. simple interest. a. Use

2. $1,800 due in 8months to 5month from now = <3month

p?
r 3% p.a 0.03
t 3months 3/12 0.25
s $1,800.00

p = s / (1 + rt)
p = 1800/(1+(0.03*(3/12)))
p = $1,786.60

What single payment is required to settle both debts in one month? Assume a simple interest

2. $1,600 due to 8months to 1month(focal) =<7month

Principal (Present Value) p?
Rate of Interest r 5.80% p.a 0.058
Time t 7month 8 (due date)-1(pay) 0.5833333
urity Value (Future Value) s $1,600.00

p = s / (1 + rt)
p= 1600/(1+(0.058*(7/12)))
p= $1,547.64
s required to settle the loan with two equal payments, one today and the other in five months.

5months
x
s1
$12,100.00

erial supplier. What single payment in 5 months would settle both these payments? Assume a

2. $2,950 in 18month to 5month(focal) =<13months

Principal (Present Value) p?
Rate of Interest r 4.25% p.a 0.0425
Time t 13months 13/12 1.0833333
urity Value (Future Value) s $2,950.00

p = s / (1 + rt)
p = 2950/(1+(0.0425*(13/12)))
p = $2,820.16

He is required to settle the amount owed with two equal payments, one today and the other in

6months
x
s1
$12,122.00
usiness. At the end of 2 months, she paid them $3,800 and $2,900 at the end of 5 months. How
the focal date.

$23,500.00
Focal date
Today 2month 5month 15months
$3,800.00 $2,900.00 Balance
p1 2months s1
p2 5months s2
15months s3
p3
p3 = p - ( p1+ p2 )

Se regresa al Valor Presente los pagos que Belinda realizara en el 2mes (p1) y el 5mes (p2)
Se resta el (p1+p2) sobre el valor total del prestamo = p3 - (p1+p2)
Hallado el valor Presente del saldo posterior a los pagos, se lleva al valor futuro desde el focal date hasta el pago final del balanc

the balance after payment 1 and payment 2

Remember to convert days (xdays/365) or months (xmonths/12) in years depending on the case
Interest rate given in percent x.xx% divided into 1 = 4.25% / 1 = 0.0425
e of Payment

+s2(debt 1)=s3(payment)+x
date hasta el pago final del balance
Compound Interest
Future Value FV Formulas FV = PV (1+ i)^n
Present Value PV PV = FV / (1+i)^n
Compound Interest I$ PV = FV (1+ i)^-n
Time period (total years) t I = FV - PV
Compounding Period Anual-Montlhy.. i=j/m i = ((FV/PV)^(1/n))-1
Comp. Frecuency (#Comp. Period x_year) m n=m.t
Total Compound. Periods nn = m . t m=j/i
Nominal Intertest Rate (..% compounded) j /1 = 0.xx j=i.m
Periodic Interest Rate ii = j / m PV = PV1 X + PV2 X + PV3 X

In an investment that is earning 2.25% compounded monthly for 2 years and 3 months, what is the periodic interest rate (i) and

Time period (total years) t 2years and 3months (12*2)+(3) 27

Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods n?
Nominal Intertest Rate (..% compounded) j 2.25% 0.0225
Periodic Interest Rate i?

i=j/m n=m.t
i = 0.0225/12 n = 12*2.25
i= 0.001875 n = 27
i= 0.19
R/ The periodic interest rate is 0.19 and there are 27 compounding periods

With 12% compounded quarterly for 4 years, what is the periodic interest rate (i) and number of compounding periods (n)?

Time period (total years) t 4 years

Compounding Period Quarterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods n?
Nominal Intertest Rate (..% compounded) j 12% 0.12
Periodic Interest Rate i?

i=j/m n=m.t
i = 0.12/4 n = 4*4
i= 3% n= 16
R/ The periodic interest rate is 3% and there are 16 compounding periods

1. Calculate the periodic interest rate corresponding to a nominal rate of 6.8% compounded quarterly.

Compounding Period Quaterly

Comp. Frecuency (#Comp. Period x_year) m 4
Nominal Intertest Rate (..% compounded) j 6.80% 0.068
Periodic Interest Rate i?
 i=j/m
i = 0.068/4
i= 1.7%
R/ The periodic interest rate is 1.7%

2. What is the compounding frequency if the periodic interest rate is 0.72% for a nominal interest rate of 8.64%?

Comp. Frecuency (#Comp. Period x_year) m?

Nominal Intertest Rate (..% compounded) j 8.64% 0.0864
Periodic Interest Rate i 0.72% 0.0072

i=j/m
m=j/i
m = 0.0864/0.0072
m= 12
R/ The compounding frequency is 12

3. Calculate the nominal rate of interest if the periodic rate is 3.4% every six months.

Compounding Period Semi-anually

Comp. Frecuency (#Comp. Period x_year) m 2
Nominal Intertest Rate (..% compounded) j?
Periodic Interest Rate i 3.40% 0.034

i=j/m
i.m=j
0.034*2 = j
6.8% = j
R/ The Nominal Interest Rate is 6.8% semi-anually

4. Ada borrowed $3.000 at 4.5% compunded anually. She repaid the loan in four years. Calculate the accumulated value of the lo

Future Value FV ?
Present Value PV $3,000.00
Compound Interest I?
Time period (total years) t 4 years 4
Compounding Period Anually
Comp. Frecuency (#Comp. Period x_year) m 1
Total Compound. Periods n 4
Nominal Intertest Rate (..% compounded) j 4.50% 0.045
Periodic Interest Rate i%

6. If Shanta deposited $2800 in an investment fund that was earning 5.5% compunded semi-anually for a period of three years, c
 Future Value FV ?
Present Value PV $2,800.00
Compound Interest I?
Time period (total years) t 4 years
Compounding Period Anually
Comp. Frecuency (#Comp. Period x_year) m 1
Total Compound. Periods n 0
Nominal Intertest Rate (..% compounded) j 5.50% 0.055
Periodic Interest Rate i%

14. Aubrey deposited $25000 in her bank savings account that earns 2% compunded daily. At the end of one year, she deposite
the end of 450 days?
1 1day to 365day
Future Value FV ?
Present Value PV $25,000.00
Compound Interest I? 365/365 1 years
Time period (total years) t 365days 1year
Compounding Period Daily
Comp. Frecuency (#Comp. Period x_year) m 365
Total Compound. Periods n 365
Nominal Intertest Rate (..% compounded) j 2.00% 0.02
Periodic Interest Rate ii = j / m 0.02/365 5.4795E-05

FV = PV (1+ i)^n
FV = 25000*(1+0.02/365)^365
FV = $25,505.02 Balance at the end of the 1year in her account

2 >365day to 450day
Future Value FV ?
Present Value PV $25.505 (Balance 1year)+$18.000 (additional $43,502.02
Compound Interest I?
Time period (total years) t 85days 85/365 0.23287671
Compounding Period Daily
Comp. Frecuency (#Comp. Period x_year) m 365
Total Compound. Periods nn = m . t 85
Nominal Intertest Rate (..% compounded) j 2.00% 0.02
Periodic Interest Rate ii = j / m 0.02/365

FV = PV (1+ i)^n
FV = 43502*(1+(0.02/365))^85
FV = $43,705.08 Balance at the end of the 465days
24. On may 16, 2015 Jonah invested $30.000 in a fund that was growing at 3.75% compounded semi-anually. On april 27-2016, t
constant thereafter. What will be the accumulated value of the fund on august 29,2020

1 May 16,2015 to April 27,2016

Future Value FV
Present Value PV $30,000.00
Time period (total years) t 5/16/2015 4/27/2016 347 347/365
Compounding Period Semi-anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 2*(347/365) 1.90136986
Nominal Intertest Rate (..% compounded) j 3.75% 0.0375
Periodic Interest Rate ii = j / m 0.0375/2 0.01875

FV = PV (1+ i)^n
FV = 30000*(1+0.01875)^1.90137
FV = $31,078.55 Balance at April 27, 2016

2 April 27,2016 to August 29,2020

Future Value FV ?
Present Value PV $31,078.55
Time period (total years) t 4/27/2016 8/29/2020 1585
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 12*(1585/365) 52.109589
Nominal Intertest Rate (..% compounded) j 4.25% 0.0425
Periodic Interest Rate ii = j / m 0.0425/12 0.00354167

FV = PV (1+ i)^n
FV = 31078.55*(1+(0.0425/12))^(12*(1585/365))))
FV = 31078.55*(1+0.003542)^52.10959
FV = $37,365.46 Balance final at August 29,2020

10. What ammount invested today will amount to $13.695.13 in two years if the intrerest rate is 4.2% compunded monthly for th

1 Second year to First year

Future Value FV $13,695.13
Present Value PV
Time period (total years) t 1 year
Compounding Period Daily
Comp. Frecuency (#Comp. Period x_year) m 365
Total Compound. Periods nn = m . t 365*1 365
Nominal Intertest Rate (..% compounded) j 5% 0.05
Periodic Interest Rate ii = j / m 0.05/365 0.00014

PV = FV / (1+i)^n
PV = 13695.13/((1+(0.05/365))^(365*1))
PV = $13,027.26 Balance at the end of the first year
 1 End first year to today (Present value)
Future Value FV $13,027.00
Present Value PV
Time period (total years) t 1 year
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 12*1 12
Nominal Intertest Rate (..% compounded) j 4.2% 0.042
Periodic Interest Rate ii = j / m 0.042/12 0.0035

PV = FV / (1+i)^n
PV = 13027/((1+(0.042/12))^(12*1))
PV = $12,492.11 Amount requiered to get the Future value in 2 years of $13.6

9.3 > 1
Future Value FV $17,500.00
Present Value PV ?
Compound Interest I$
Time period (total years) t 4years
Compounding Period
Comp. Frecuency (#Comp. Period x_year) m 0.069*0.01725 4
Total Compound. Periods n 4*4 16
Nominal Intertest Rate (..% compounded) j 6.90% 0.069
Periodic Interest Rate i 1.725% 0.01725

PV = FV / (1+i)^n
PV = 17500/((1+0,01725)^16)
PV = $13,310.52

24. Karen has the following two options to receive a loan payment: Option A: Receiving the payment of $5000 today, or Option
3.45% compounded semi-annually, which option is more economical for her and by how much?

Future Value FV $2,250.00

Present Value PV ? p1
Compound Interest I$ p2
Time period (total years) t 1
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 2
Nominal Intertest Rate (..% compounded) j 3.45% 0.0345
Periodic Interest Rate ii = j / m 0.0345 / 2 0.01725

PV = FV / (1+i)^n
PV = 2250/((1+0.01725)^2)
PV = $2,174.34
 p1+p2 3000+2174
p1+p2 $5,174.00 Option B y more economical for her

28.A bank offered a personal loan to Eduardo at an interest rate of 6.5% compounded semi-annually for two years. At the end o
value of the loan

Future Value FV
Present Value PV
Compound Interest I $880.50
Time period (total years) t 2
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 4
Nominal Intertest Rate (..% compounded) j 6.50% 0.065
Periodic Interest Rate ii = j / m 0.065/2 0.0325

I = FV-PV
880.50 = X - PV To find PV is necessary to find FV (variable of the formula)
PV = X - 880.50

PV = FV / (1+i)^n
X - 880.50=𝑋/ 〖 (1+0.0325) 〗 ^4 Then cross multiplication
Cuando la X se pasa al otro se convierte en 1X

12.A law firm invested its net profit into an investment fund that provided an initial interest rate of 4.55% compounded monthly
compounded monthly. If the accumulated value one year after the boom was $480,000, calculate the amount that was originally
1. 12month to 6month 8.75%
Future Value FV $480,000.00
Present Value PV ?
Compound Interest I$
Time period (total years) t 1year
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 12*1 12
Nominal Intertest Rate (..% compounded) j 8.75% 0.0875
Periodic Interest Rate ii = j / m 0.0455/12 0.00379167

PV = FV / (1+i)^n
PV = 480000/((1+(0.0875/12))^12)
PV = $439,924.70 PV at the 6month or FV2

1. 6month to today 4.55%

Future Value FV $439,924.70
 Present Value PV ?
Compound Interest I$
Time period (total years) t 6months 6/12 0.5
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 12*(6/12) 6
Nominal Intertest Rate (..% compounded) j 4.55% 0.0455
Periodic Interest Rate ii = j / m 0.0455/12 0.00379167

PV = FV / (1+i)^n
PV = 439924.70/((1+(0.0455/12))^6)
PV = $430,047.90 Original investment

Equivalent Payments
9.4 > 8.What single payment today would replace a payment of $5000 in one year and $8000 in two years if the interest rate is 4
1. $5.000 in 1year <PV?
Future Value FV $5,000.00
Present Value PV
Compound Interest I
Time period (total years) t 1
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12 Comp. Frecuency (#Comp. Perio
Total Compound. Periods nn = m . t 12
Nominal Intertest Rate (..% compounded) j 4.00% 0.04 Nominal Intertest Rate (..% comp
Periodic Interest Rate ii = j / m 0.003333333

PV = FV / (1+i)^n
PV = 5000/((1+(0.04/12))^12)
PV = $4,804.27 PV1+PV2
R/ $4,804.21+$7,385.91
R/ $12,190.12

9.4 > 10.You had an agreement to pay $6070 in 300 days and $10,500 in 500 days. What single payment 200 days earlier than th
compounded daily.
1. $.6070 in 300days < To 100day = <200days (Entre fechas)> PV?
Future Value FV $6,070.00
Present Value PV ?
Compound Interest I
Time period (total years) t 200 days
Compounding Period Daily
Comp. Frecuency (#Comp. Period x_year) m 365 365/365 Less 1 Comp. Frecuency (#Comp. Perio
Total Compound. Periods nn = m . t 200.00
Nominal Intertest Rate (..% compounded) j 3% daily 0.03 Nominal Intertest Rate (..% comp
Periodic Interest Rate ii = j / m 0.03/365

PV = FV / (1+i)^n
PV = 6070/((1+(0.03/365))^200)
 PV = $5,971.04

PV1+PV2
R/ $5,971.04+$10,160.42
R/ $16,131.46

9.4 >18 What three equal payments in one year, two years, and three years would replace one single payment of $4000 today a

Future Value FV X + X + X
Present Value PV X + X + X
Compound Interest I$ X X X
Time period (total years) t 1year 2year 3year
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 12 24 36
Nominal Intertest Rate (..% compounded) j 6%monthly 0.06
Periodic Interest Rate ii = j / m 0.06/12

9.4 > 22.Calculate the two equal installments, one in one year and the other in two years, that would replace a payment of $2000
compounded semi-annually.

Assigment 3
1. For a sum of money invested at 20% compounded quarterly for 14 years, state:
a. The number of compounding periods.
n = m . t 56
b. The periodic interest rate (i).
i=j/m 0.050000 5.00
c. The numerical value of the compounding factor (1 + i)n.
(1+i)n (1+(0.2/4))^56 15.367412

Time period (total years) t 14 years

Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods nn = m . t 56
Nominal Intertest Rate (..% compounded) j 20% 0.2
Periodic Interest Rate ii = j / m 0.05 5

1. (3 Attempt) For a sum of money invested at 18% compounded quarterly for 23 years, state

a. The number of compounding periods.

n = m . t 92
b. The periodic interest rate (i).
i=j/m 0.045 4.50
c. The numerical value of the compounding factor (1 + i)^n.
(1 + i)^n ((1+(0.18/4))^92)
57.371832

Time period (total years) t 23 years

Compounding Period Quarterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods nn = m . t 92
Nominal Intertest Rate (..% compounded) j 18% 0.18
Periodic Interest Rate ii = j / m 0.045 4.50

2. Brian invested $4,250 at 4.83% compounded quarterly. a. Calculate the future value of the investment at the end of 3 years. b.

Future Value FV
Present Value PV $4,250.00
Compound Interest I$
Time period (total years) t 3 years
Compounding Period Quarterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods nn = m . t 12
Nominal Intertest Rate (..% compounded) j 4.83% 0.0483
Periodic Interest Rate ii = j / m 0.012075

FV = PV (1+ i)^n
FV= 4250*((1+(0.0483/4))^12)
FV= $4,908.42
 I = FV - PV
I = $4,904-$4,250
I = $654.00

3. Vincent loaned $56,000 to a small business at 3.65% compounded semi-annually for 1 year and 6 months. How much would t

Future Value FV ?
Present Value PV $56,000.00
Time period (total years) t 1year and 6month 18/12 1.5
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 3
Nominal Intertest Rate (..% compounded) j 3.65% 0.0365
Periodic Interest Rate ii = j / m 0.01825

FV = PV (1+ i)^n
FV = 56000*((1+(0.0365/2))^3)
FV = $59,122.29

4. An investment of $15,000 is growing at 4% compounded semi-annually.

a. Calculate the maturity value of this investment at the end of year 1.
b. If the interest rate changed to 5% compounded monthly at the end of year 1, calculate the maturity value of this investment a
c. Calculate the total amount of interest earned from this investment during the 5-year period.
a. Begining up to the end of the first year
Future Value FV
Present Value PV $15,000.00
Compound Interest I$
Time period (total years) t 1 year
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 2
Nominal Intertest Rate (..% compounded) j 4.00% 0.04
Periodic Interest Rate ii = j / m 0.02

FV = PV (1+ i)^n
FV = 15000*((1+(0.04/2))^2)
FV = $15,606.00 At the end of the first Year

b. From 2nd year to the of year 5 = 4years

Future Value FV ?
Present Value PV $15,606.00 At the end of the first Year
Compound Interest I$
Time period (total years) t 4 years
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 48
 Nominal Intertest Rate (..% compounded) j 5% 0.05
Periodic Interest Rate ii = j / m 0.004166667

FV = PV (1+ i)^n
FV = 15606*((1+(0.05/12))^48)
FV = $19,053.29 At the end of the 5year

c. Interes earned during 5-year period

I = FV - PV
I = $19,053-$15,000
I = $4,053.00 Interes earned during 5-year period

5. Benjamin would like to accumulate $115,000 for his retirement in 13 years. If he is promised a rate of 4.80% compounded mo

Future Value FV $115,000.00

Present Value PV ?
Compound Interest I$
Time period (total years) t 13 years
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 156
Nominal Intertest Rate (..% compounded) j 4.80% 0.048
Periodic Interest Rate ii = j / m 0.004

PV = FV / (1+i)^n
PV = 115000/((1+(0.048/12))^156)
PV = $61,693.39 Amount to instest today to reach $115,000 y 13years

6. How much did Speedy Movers borrow for a debt that accumulated to $53,751.68 in five years? The interest rate was 4.95% co

Future Value FV $53,751.68

Present Value PV ?
Compound Interest I$
Time period (total years) t 5 years
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 10
Nominal Intertest Rate (..% compounded) j 4.95% 0.0495
Periodic Interest Rate ii = j / m 0.02475

PV = FV / (1+i)^n
PV = 53751.68/((1+(0.0495/2))^10)
PV = $42,093.28 Initial Loan

7. The interest rate on a GIC is 4.20% compounded semi-annually. What is the purchase price of the GIC if it has a maturity value

Future Value FV $31,403.00

 Present Value PV ?
Compound Interest I$
Time period (total years) t 4yeas and 4month 52 months 52/12
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t
Nominal Intertest Rate (..% compounded) j 4.20% 0.042
Periodic Interest Rate ii = j / m

PV = FV / (1+i)^n
PV = 31403/((1+(0.042/2))^(2*(52/12)))
PV = $26,226.97 Initial purchase

PV = FV (1+ i)^-n
PV = 31403*((1+(0.042/2))^-(2*(52/12)))
PV = $26,226.97

7. (2 Attempt) The interest rate on a GIC is 4.77% compounded monthly. What is the purchase price of the GIC if it has a maturit

Future Value FV $31,456.00

Present Value PV ?
Compound Interest I$
Time period (total years) t 3years 7months 43 months 43/12
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t
Nominal Intertest Rate (..% compounded) j 4.77% 0.0477
Periodic Interest Rate ii = j / m 0.003975

PV = FV / (1+i)^n
PV = 31456/((1+(0.0477/12))^(12*(43/12)))
PV = $26,522.77

PV = FV (1+ i)^-n
PV = 31456*((1+(0.0477/12))^-(12*(43/12)))
PV = $26,522.77
8. What is the value today of $7,500 that is due in 4 (1/4)
years if the interest rate is 2.77% compounded monthly?

Future Value FV $7,500.00

Present Value PV ?
Time period (total years) t 4 (1/4)years 51 months 51/12
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 51
Nominal Intertest Rate (..% compounded) j 2.77% 0.0277
Periodic Interest Rate ii = j / m 0.002308333
 PV = FV / (1+i)^n
PV = 7500/((1+(0.0277/12))^(12*(51/12)))
PV = $6,667.96 Value today to reach $7,500 in 4 (1/4) years

PV = FV (1+ i)^-n
PV = 7500*((1+(0.0277/12))^-(12*(51/12)))
PV = $6,667.96

Assigment 4
Excercise 1 > If money earns 8.04% compounded quarterly, what single payment in three years would be equivalent to a paymen
1 3years ago to today
Future Value FV ?
Present Value PV $3,400.00
Time period (total years) t 3 years
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods n 12
Nominal Intertest Rate (..% compounded) j 8.04% 0.0804
Periodic Interest Rate ii = j / m 0.0201

FV = PV (1+ i)^n FV = PV (1+ i)^n

FV = 3400*(1+(0.0804/4))^12 FV =
FV = $4,317.10 FV =

1 P1 + P2 (Today) to in 3years
Future Value FV ?
Present Value PV $5,217.10
Time period (total years) t 3 years
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods n 12
Nominal Intertest Rate (..% compounded) j 8.04% 0.0804
Periodic Interest Rate ii = j / m 0.0201

FV = PV (1+ i)^n FV =
FV = 5217.10*(1+(0.0804/4))^12 FV =
FV = $6,624.33 Payment in 3 years for both loans

Excercise 2 > Two payments of $8,000 and $3,900 are due in 1 year and 2 years, respectively. Calculate the two equal payments t
worth 5% compounded quarterly.

Time period (total years) t 1 PV1 $8,000.00

Time period (total years) t 2 PV2 $3,900.00
Time period (total years) t 0.25 PV3 X
Time period (total years) t 3 PV4 X
Compounding Period Quaterly
 Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods n 4 PV1 $8,000.00
Total Compound. Periods n 8 PV2 $3,900.00
Total Compound. Periods n 1 PV3 X
Total Compound. Periods n 12 PV4 X
Nominal Intertest Rate (..% compounded) j 5.00% 0.05
Periodic Interest Rate ii = j / m 0.0125 8000*((1+(0.05/4))^-4)+3900*((1+(0.0
$7,612.19

Excercise 3 > What single payment today would replace a payment of $1,500 in 3 years and a payment of $3,900 in 4 years if the
1. $1,500 in 3years
Future Value FV $1,500.00
Present Value PV ?
Time period (total years) t 3 years
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2 Comp. Frecuency (#Comp. Perio
Total Compound. Periods n 6
Nominal Intertest Rate (..% compounded) j 7.45% 0.0745 Nominal Intertest Rate (..% comp
Periodic Interest Rate ii = j / m 0.03725

PV = FV / (1+i)^n
PV = 1500/(1+(0.0745/2))^6
PV = $1,204.46
R/ $4,115.15

Excercise 4 > Payments of $1,750 in 1 year and another $2,300 in 5 years to settle a loan are to be rescheduled with a payment o
in 24 months for the rescheduled option to settle the loan if money earns 5.5% compounded quarterly during the above periods
1 Payment $1,750
Future Value FV $1,750.00
Present Value PV ?
Time period (total years) t 1 Time period (total years)
Compounding Period Quaterly Compounding Period
Comp. Frecuency (#Comp. Period x_year) m 4 Comp. Frecuency (#Comp. Period x_year)
Total Compound. Periods n 4 Total Compound. Periods
Nominal Intertest Rate (..% compounded) j 5.50% 0.055 Nominal Intertest Rate (..% compounded)
Periodic Interest Rate ii = j / m 0.01375 Periodic Interest Rate

PV = FV / (1+i)^n
PV = 1750/(1+(0.055/4))^4 VP Loans
PV = $1,656.97 $3,407.26

Loans to first payment (18months)

Future Value FV ?
Present Value PV $3,407.26
 Time period (total years) t 1.5 Years Time period (total years)
Compounding Period Quaterly Compounding Period
Comp. Frecuency (#Comp. Period x_year) m 4 Comp. Frecuency (#Comp. Period x_year)
Total Compound. Periods n 6 Total Compound. Periods
Nominal Intertest Rate (..% compounded) j 5.50% 0.055 Nominal Intertest Rate (..% compounded)
Periodic Interest Rate ii = j / m 0.01375 Periodic Interest Rate

FV = PV (1+ i)^n
FV = 3407.26*(1+(0.055/4))^6
FV = $3,698.20

= $3,698 - $800
$2,898.00 After payment in 18month

Excercise 5 > What three equal payments, one in 2 years, one in 5 years, and one in 7 years would replace one single payment o

Time period (total years) t 2 PV1

Time period (total years) t 5 PV2
Time period (total years) t 7 PV3
Compounding Period Quaterly $36,000/2.3072846
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods n 8 PV1
Total Compound. Periods n 20 PV2
Total Compound. Periods n 28 PV3
Nominal Intertest Rate (..% compounded) j 5.82% 0.0582
Periodic Interest Rate ii = j / m 0.01455

Future Value FV
Present Value PV $120,000.00
Compound Interest I$
Time period (total years) t 6years 8 months 6.666666667
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods nn = m . t 26.66666667
Nominal Intertest Rate (..% compounded) j 12% 0.12
Periodic Interest Rate ii = j / m 0.03000000

FV = PV (1+ i)^n
FV = 120000*(1+(0.12/4))^(4*(6+(8/12)))
FV = $263,941.23

Case Study

a. Loan Amount and Interest Earned

 Future Value FV $80,654.00
Present Value PV ?
Compound Interest I ?
Time period (total years) t 2 years
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods n 4
Nominal Intertest Rate (..% compounded) j 6% 0.06
Periodic Interest Rate i i=j/m 0.03

Present Value PV = FV / (1+i)^n Accumulated Interest

PV = 80654/(1+(0.06/2))^4 I=
PV = $71,660.03 I=

b. Rate
Future Value FV $80,654.00 ((FV/PV)^1)/n
Present Value PV $71,660.03
Time period (total years) t 2 years
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods n 24
Nominal Intertest Rate (..% compounded) j ?
Periodic Interest Rate i ?

i= ((FV/PV)^(1/n))-1
i= (((80654/71660.03)^(1/24))-1
i= 0.00493862458

j=i.m
j= 0.059263494964 5.93%
j= 5.93 %

c. Time
Future Value FV $100,000.00
Present Value PV
Time period (total years) t?
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods n?
Nominal Intertest Rate (..% compounded) j 6% 0.06
Periodic Interest Rate ii = j / m 0.03

n = LN(FV/PV)/(LN(1+i))
n = LN(100000/71660.03)/LN(1+(0.06/2))
n = 11.27369954793
 t=n/m
t = 11.27369955/2
t= 5.636849773964 0.63684977396373*12
7.64219729 months
t= 5years and 8months 229.265919

d. Compunded
Future Value FV $80,654.00
Present Value PV $71,660.03
Time period (total years) t 18months 18/12 1.5 years
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods n 3
Nominal Intertest Rate (..% compounded) j ?
Periodic Interest Rate i ?

i= ((FV/PV)^(1/n))-1
i= ((80654/71660.03)^(1/3))-1
i= 0.04019870418

j=i.m
j = 0.040198704*2
j= 0.080397408 8.04%
j= 8.04 %

e. Present value Anually

Future Value FV $80,654.00

Present Value PV ?
Time period (total years) t 2 years
Compounding Period Anually
Comp. Frecuency (#Comp. Period x_year) m 1
Total Compound. Periods n 2
Nominal Intertest Rate (..% compounded) j 6% 0.06
Periodic Interest Rate i 0.03

Present Value PV = FV / (1+i)^n

PV = 80654/(1+(0.06/1))^2 1.1236
PV = $71,781.77

Coompounding Frequency Options PV FV Interest

Anually ( e ) $71,781.77 $80,654.00 $8,872.23
Semi-Anually (a) $71,660.03 $80,654.00 $8,993.97
-$121.74 Savings

Interest e - Interest a
$8.872.23-$8.993.97
 -$121.74

f. Present Value PV 1 = <1year $25.000

Future Value FV $25,000.00
Present Value PV ?
Time period (total years) t 1 year
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods n 2
Nominal Intertest Rate (..% compounded) j 6% 0.06
Periodic Interest Rate i 0.03 0.03

PV = FV / (1+i)^n
PV = 25000/(1+(0.06/2))^2
PV = $23,564.90 PV1

PV 2 = <2years $40.000
Future Value FV $40,000.00
Present Value PV ?
Time period (total years) t 2 year
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods n 4
Nominal Intertest Rate (..% compounded) j 6% 0.06
Periodic Interest Rate ii = j / m 0.03

PV = FV / (1+i)^n
PV = 40000/(1+(0.06/2))^4
PV = $35,539.48 PV2

PV1+PV2 $59,104.38

g. <2year 8% Quaterly
Future Value FV $80,654.00
Present Value PV ?
Time period (total years) t 1
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods nn = m . t 4
Nominal Intertest Rate (..% compounded) j 8% 0.08
Periodic Interest Rate ii = j / m 0.02

PV = FV / (1+i)^n
PV = 80654/(1+(0.08/4))^4
PV = $74,511.83

<1year 6% Semi-Anually
 Future Value FV $74,511.83
Present Value PV ?
Time period (total years) t 1
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods nn = m . t 2
Nominal Intertest Rate (..% compounded) j 6% 0.06
Periodic Interest Rate ii = j / m 0.03

PV = FV / (1+i)^n
PV = 74511.83/(1+(0.06/2))^2
PV = $70,234.55
 Frequency (m)
Comp. Period Length C. Period
per year
Anually Every year 1 Remember to convert days (xdays/365) or months (xmonths
Semi-anually Every 6 months 2 Interest rate given in percent x.xx% divided into 1 = 4.25% /
Quarterly Every 3 months 4 Para sacar el total en varias formulas, mejor calcular con la o
((FV/PV)^(1/n))-1 Monthly Every month 12
Daily Every day 365

V2 X + PV3 X PV1 + PV2 = PV3 X + PV4 X

he periodic interest rate (i) and number of compounding periods (n)?

27/12 2.25 years

compounding periods (n)?

 rate of 8.64%?

the accumulated value of the loan at the end of the term and the interest charged during the period

ally for a period of three years, calculate the accumulted value of the investment and the interest earned during the period
e end of one year, she deposited and additional $18.000 into this account. What was the balance in her account at

P2+FV1
$18,000.00 85
Today 365 days
$25,000.00 450 days
P1 FV1

ar in her account
emi-anually. On april 27-2016, the interest rate on the fund changed to 4.25% compounded monthly and remained

0.9506849315

2% compunded monthly for the first year and 5% compounded daily for the second year

4.2% monthly 5% daily

Today 1 year 2year
? $13,695.00
Future value in 2 years of $13.695.13

ent of $5000 today, or Option B: Receiving payments of $3000 today and $2250 one year later. If money is worth

Today 1 year
$3,000.00 $2,250.00

p1+p2 = Option B
ally for two years. At the end of the period, if the amount of interest charged was $880.50, calculate the present

FV (variable of the formula)

pasa al otro se convierte en 1X

f 4.55% compounded monthly. After six months, there was a boom in the market and the interest rate rose to 8.75%
the amount that was originally invested.

8.75% monthly
Today 6month 1 year 1year and 6months
PV1 $480,000.00 FV1
PV2 6months FV2
4.55% monthly
wo years if the interest rate is 4% compounded monthly?
1. $8.000 in 2year <PV?
Future Value FV $8,000.00
Present Value PV ?
Compound Interest I
Time period (total years) t 2
Compounding Period Monthly
omp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn =m . t 24
ominal Intertest Rate (..% compounded) j 4.00% 0.04
Periodic Interest Rate ii = j / m 0.00333333

PV = FV / (1+i)^n
PV = 8000/((1+(0.04/12))^24)
PV = $7,385.91
804.21+$7,385.91
Single Payment today

ayment 200 days earlier than the first scheduled payment would pay off this debt? Assume that money earns 3%

tre fechas)> PV? 2. $10.500 in 500days < To 100day = <400days (Entre fechas)> PV?
Future Value FV $10,500.00
Present Value PV ?
Compound Interest I
Time period (total years) t 400 days
Compounding Period Daily
omp. Frecuency (#Comp. Period x_year) m 365 365 365/365 Less 1
Total Compound. Periods nn =m . t 400.00
ominal Intertest Rate (..% compounded) j 3% daily 0.03
Periodic Interest Rate ii = j / m 0.03/365

PV = FV / (1+i)^n
PV = 10500/((1+(0.03/365))^400)
 PV = $10,160.42

971.04+$10,160.42
Single Payment in the 100day

ngle payment of $4000 today at an interest rate of 6% compounding monthly?

$4,000.00 6% monthly
Focal date
Today 1year 2year 3year
X X X
PV1 12months FV1
PV2 24months FV2
PV3 36months FV3

PV = PV1 + PV2 + PV3

$4.000 = PV1 + PV2 + PV3

$4,000 = X/((1+(0.06/12))^12) + X/((1+(0.06/12))^24) + X/((1+(0.06/12))^36))

PV1 = 1.06168 PV2 = 1.12716 PV3 = 1.19668
$4,000 = 1X/1.06168 + 1X/1.12716 + 1X/1.19668
$4,000 = 0.941903398 X + 0.88718549 X + 0.8356453 X
$4,000 = 2.664734176 X
$4,000/2.6647341 = 2.2.6647341X / 2.6647341
$1,501 =X

uld replace a payment of $2000 today and a payment of $8500 in five years. Assume money is worth 4%

$2,000.00 4% Semi-Anually
Today 1year 2year
X X
PV3 2semi-anually = n3 FV3
PV2 8semi-anually = n2 FV2
PV1 10semi-anually = n1
stment at the end of 3 years. b. Calculate the amount of interest earned during the 3 year period.
d 6 months. How much would the business have to repay him at the end of the period?

turity value of this investment at the end of year 5.

ate of 4.80% compounded monthly by his local bank, how much should he invest today?

reach $115,000 y 13years

The interest rate was 4.95% compounded semi-annually.

he GIC if it has a maturity value of $31,403 in 4 years and 4 months?

 4.3333333333 years

ce of the GIC if it has a maturity value of $31,456 in 3 years and 7 months?

3.5833333333 years

4.25
in 4 (1/4) years

ould be equivalent to a payment of $3,400 due three years ago, but not paid, and $900 today?

3years Today 3years

$3,400.00 $900.00 x
s1 $4,317.10
s2
$5,217.10 $6,624.33
FV1+ FV2 = X

= PV (1+ i)^n
3400*(1+(0.0804/4))^24
$5,481.57

900*(1+(0.0804/4))^12
$1,142.76

ulate the two equal payments that would replace these payments, made in 3 months and in 3 years if money is

Focal date
Today 6month 1year 2year 3year
$12,000.00 $4,600.00
PV1 4Q FV1
 PV2 8Q FV2
PV3 2Q x
PV4 12Q x

1+(0.05/4))^-4)+3900*((1+(0.05/4))^-8) = X (1+(0.05/4))^-1 + X (1+(0.05/4))^-12 Hallar PV de los 3 FV que se desco

+ $3,531.05 = 0.987654321 X 0.8615086 X Realizar Operación matematica de
$11,143.25 = 1.849162921 X Sumar valores de resultado anterio
$11,143.25/1.18491629 = X
$6,026.10 = X 2 Equal Payment

yment of $3,900 in 4 years if the interest rate is 7.45% compounded semi-annually?

1. $3,900 in 4years
Future Value FV $3,900.00
Present Value PV ?
Time period (total years) t 4 years
Compounding Period Semi-Anually
omp. Frecuency (#Comp. Period x_year) m 2
Total Compound. Periods n 8
ominal Intertest Rate (..% compounded) j 7.45% 0.0745
Periodic Interest Rate ii = j / m 0.03725

PV = FV / (1+i)^n
PV = 3900/(1+(0.0745/2))^8
PV = $2,910.70
Single payment today

e rescheduled with a payment of $800 in 18 months and the balance in 24 months. Calculate the payment required
arterly during the above periods.
2 Payment $2,300
Future Value FV $2,300.00 Today 1year
Present Value PV ? $1,750.00
Time period (total years) t 5 PV1 2Quarter FV1
Compounding Period Quaterly PV2
ncy (#Comp. Period x_year) m 4
Total Compound. Periods n 20
est Rate (..% compounded) j 5.50% 0.055 PV1 + PV2 = $800 + x
Periodic Interest Rate ii=j/m 0.01375

PV = FV / (1+i)^n
PV = 2300/(1+(0.055/4))^20
PV = $1,750.29

In 18month to > Balance 24month

Future Value FV ?
Present Value PV $2,898.00
 Time period (total years) t 0.50 Years
Compounding Period Quaterly
ncy (#Comp. Period x_year) m 4
Total Compound. Periods n 2
est Rate (..% compounded) j 5.50% 0.055
Periodic Interest Rate ii=j/m 0.01375

FV = PV (1+ i)^n
FV = 2898*(1+(0.055/4))^2
FV = $2,978.24 Balance for mayment at 24month

d replace one single payment of $36,000 due today at an interest rate of 5.82% compounding quarterly?

PV = PV1 X + PV2 X + PV3 X

$36,000.00 = X (1+(0.0582/4))^-8 + X (1+(0.0582/4))^-20 + X (1+(0.0582/4))^-28
$36,000.00 = 0.890865947 X 0.74908465 X 0.667334 X
$36,000.00 = 2.307284597 X
$36,000/2.3072846 = X
$15,602.76 = X 3 Equal Payment
I = FV - PV
$80,654-$71,660.03
$8,993.97
0.63684977396373*365
232.5
229.2
 Focal date
PV X 1year 2year
$25,000.00 $40,000.00
PV1 FV1
PV2 FV2

PVx = PV1 + PV2

ys (xdays/365) or months (xmonths/12) in years depending on the case
cent x.xx% divided into 1 = 4.25% / 1 = 0.0425
as formulas, mejor calcular con la operación de la división Ex. n= m.t => m.(#days/365)
uring the period
Hallar PV de los 3 FV que se desconocen (FV1 X + FV2 X + FV3 X)
Realizar Operación matematica de formula PV (1+i)^n
Dividir reusltado de operación anterior (numero de abajo) en 1
Sumar valores de resultado anterior

Dividir en el resultado para anular valores y despejar X

Hacerlo con formula de -n

5year
$8,500.00

FV1
8000/(1+(0.05/4))^4
$7,612.19

3900/(1+(0.05/4))^8
 $3,531.05

Hallar PV de los 3 FV que se desconocen (FV1 X + FV2 X + FV3 X)

Realizar Operación matematica de formula PV*(1+i)^-n
Sumar valores de resultado anterior

18months 24months 5year

x $2,300.00

FV3 12Quarter FV2

6 months
$800.00 FV4
Compound Interest
Periodic Interest Rate i i =((FV/PV)^(1/n))-1
Nominal Interest Rate (..% Compounded) jj = m . i
Future Value FV
Present Value PV
Compound Interest I$
Time period (total years) t
Compounding Period Anual-Montlhy..
Comp. Frecuency (#Comp. Period x_year) m
Total Compound. Periods nn = m . t

Assigment 5
Excercise 1 > Nathan invested an amount of $10,000 in a mutual fund. After 3 years and 6 months the accumulated value of his
rate of the investment?

Periodic Interest Rate i i =((FV/PV)^(1/n))-1

Nominal Interest Rate (..% Compounded) jj = m . i ?
Future Value FV $11,408.15
Present Value PV $10,000.00
Time period (total years) t 3years 6months 3.5
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods n 42 42

i =((FV/PV)^1/n)-1
i = ((11408.15/10000)^(1/42))-1 j=
i = 0.003141660878 j=
j=

Excercise 1 > Samantha invested an amount of $22,000 in a mutual fund. After 4 years and 3 months the accumulated value of h
interest rate of the investment?

Periodic Interest Rate i i =((FV/PV)^(1/n))-1

Nominal Interest Rate (..% Compounded) jj = m . i ?
Future Value FV $24,262.58
Present Value PV $22,000.00
Time period (total years) t 4years 3month 4.25
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods n 17 17

i =((FV/PV)^1/n)-1
i = ((24262.58/22000)^(1/(4*(4+(3/12))))-1 j=
i = 0.005775011006 j=
j=

Excercise 2 > If an investment grew to $11,000 in 3 years and the interest amount earned was $1,150, calculate the nominal inter
 Periodic Interest Rate i i =((FV/PV)^(1/n))-1
Nominal Interest Rate (..% Compounded) jj = m . i
Future Value FV $12,150.00
Present Value PV $11,000.00
Compound Interest I $1,150.00
Time period (total years) t 3 years
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4
Total Compound. Periods nn = m . t 12

i =((FV/PV)^(1/n))-1 j=m.i
i = ((12150/11000)^(1/12))-1 j = 4 * 0.008320583
i = 0.008320583309 j = 0.033282332
j= 3.33

Excercise 2 > If an investment grew to $13,500 in 2 years and the interest amount earned was $1,250, calculate the nominal inter

Periodic Interest Rate i i =((FV/PV)^(1/n))-1

Nominal Interest Rate (..% Compounded) jj = m . i
Future Value FV $13,500.00
Present Value PV $12,250.00
Compound Interest I $1,250.00
Time period (total years) t 2 years
Compounding Period Monthly
Comp. Frecuency (#Comp. Period x_year) m 12
Total Compound. Periods nn = m . t 24

i =((FV/PV)^(1/n))-1 j=m.i
i = ((13500/12250)^(1/24))-1 j = 12 * 0.004056696
i = 0.004056695723 j = 0.0486803487
j= 4.87
hs the accumulated value of his investment was $11,408.15. What is the monthly compounded nominal interest

j=m.i
12 * 0.003141661
0.03769993
3.76999305

nths the accumulated value of her investment was $24,262.58. What is the quarterly compounded nominal

j=m.i
4 * 0.005775011
0.02310004
2.31

,150, calculate the nominal interest rate compounded quarterly.

0.008320583

,250, calculate the nominal interest rate compounded monthly.

* 0.004056696 0.04868035
Time Period and Compounding Period
Number of Compounding Periods n n = LN(FV/PV)/(LN(1+i))
Time Period in Years t t = n/m
Periodic Interest Rate ii = j / m
Nominal Interest Rate (..% Compounded) j
Future Value FV
Present Value PV
Compound Interest I$
Compounding Period Anual-Montlhy..
Comp. Frecuency (#Comp. Period x_year) m

8. A credit union is offering an interest rate of 4.29% compounded semi-annually to its college employees. How long will it take

Number of Compounding Periods n n = LN(FV/PV)/(LN(1+i)) ?

Time Period in Years t t = n/m ?
Periodic Interest Rate ii = j / m 0.0429/2 0.02145
Nominal Interest Rate (..% Compounded) j 4.29% 0.0429
Future Value FV $48,868.00
Present Value PV $40,000.00
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2

n = LN(FV/PV)/(LN(1+i))
n = LN(48868/40000)/LN(1+(0.0429/2))
n = 9.435120964764

t t = n/m
t = 9.435120965/2
t= 4.7175604825 years 0.717560483*12
t = 4years 8.6 months

10. How long would it take for an investment to at least double at 3.41% compounded semi-annually?

Number of Compounding Periods n n = (LN*(FV/PV))/(LN*(1+i))

Time Period in Years t t = n/m
Periodic Interest Rate ii = j / m 0.01705
Nominal Interest Rate (..% Compounded) j 3.41% 0.0341
Future Value FV X
Present Value PV 2X (Double)
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2

n = LN(FV/PV)/(LN(1+i))
n = LN(2X/1X)/LN(1+(0.0341/2))
n = LN(2)/LN(1+(0.0341/2))
n = 40.9993906311
 t = n/m
t = 40.99939063/2
t= 20.499695315 years 0.49969532*12
t = 20years 6.00 months

14. Hewlett Plastics Inc. received a loan of $860,000 at 8.75% compounded quarterly to purchase machinery for its factory. Calcu

Number of Compounding Periods n n = LN(FV/PV)/(LN(1+i)) ?

Time Period in Years t t = n/m ?
Periodic Interest Rate ii = j / m 0.0875/4 0.021875
Nominal Interest Rate (..% Compounded) j 8.75% 0.0875
Future Value FV $1,215,801.96 FV = PV+I FV = $860,000+$355,801.96
Present Value PV $860,000.00
Compound Interest I $355,801.96
Compounding Period Quaterly
Comp. Frecuency (#Comp. Period x_year) m 4

n = LN(FV/PV)/(LN(1+i))
n = LN(1215801.96/860000)/LN(1+(0.0875/4))
n = 15.9999998391

t = n/m
t = 15.99999984/4
t= 3.99999996 years
t= 4 years

Assigment 5
Excersice 3 > How long did it take for an investment of $28,750 to grow to $33,000 at 2.16% compounded semi-annually?

Number of Compounding Periods n n = LN(FV/PV)/(LN(1+i)) ?

Time Period in Years t t = n/m ?
Periodic Interest Rate ii = j / m 0.0108
Nominal Interest Rate (..% Compounded) j 2.16% 0.0216
Future Value FV $33,000.00
Present Value PV $28,750.00
Compound Interest I $4,250.00
Compounding Period Semi-Anually
Comp. Frecuency (#Comp. Period x_year) m 2

n = LN(FV/PV)/(LN(1+i))
n = LN(33000/28750)/LN(1+(0.0216/2)) t=
n = 12.83453316712 t=

6 years 5
 Cuando no se tiene un valor, se entiende como una variable = X

mployees. How long will it take for an investment of $40,000 to accumulate $48,868?

8.6107258 months
 5.99634384 months

e machinery for its factory. Calculate the time period of the loan if the interest accumulated was $355,801.96.

+$355,801.96

mpounded semi-annually?

t = n/m
12.83453317/2
6.41726659 years 0.4172666*12 5.0071992 months

months
Equivalent Periodic Interest Rate
Periodic Interest Rate i₁ i = j / m i =((FV/PV)^(1/n))-1
Nominal Interest Rate (..% Compounded) j₁ j=m.i
Compounding Period ₁ Anual-Montlhy..
Comp. Frecuency (#Comp. Period x_year) m₁
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Anual-Montlhy..
Comp. Frecuency (#Comp. Period x_year) m₂
Effective Interest Rate f f= ((1+i)^m) -1

8.A bank in Nova Scotia offers a return of 3.5% compounded quarterly on investments in savings accounts. What nominal intere

Periodic Interest Rate i₁ i = j / m 0.035/4 0.00875

Nominal Interest Rate (..% Compounded) j₁ 3.50% 0.035
Compounding Period ₁ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₁ 4
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Daily
Comp. Frecuency (#Comp. Period x_year) m₂ 365
Effective Interest Rate f f= (1+i)^m -1

i₂ = (1+ i₁)^(m₁/m₂)-1
i₂ = ((1+(0.035/4))^(4/365))-1
i₂ = 0.00009548 *100
i₂ = 0.00954779 %

j₂ = m₂ . i₂
j₂ = 365*0.009548
j₂ = 3.49 %

12. Koki and Jeena were shopping around for a good interest rate and they received the following rates from three different ban
compounded annually. Which interest rate is economically better for: a. An investment? b. A loan?

1
Periodic Interest Rate i₁ i = j / m 0.0584/12 0.0048416667
Nominal Interest Rate (..% Compounded) j₁ 5.84% 0.0584 Nominal Intere
Compounding Period ₁ Monthly
Comp. Frecuency (#Comp. Period x_year) m₁ 12 Comp. Frecuen
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Anually (3) Requerido para comparar las 3 tasas
Comp. Frecuency (#Comp. Period x_year) m₂ 1 Comp. Frecuen
Effective Interest Rate f f= (1+i)^m -1

i₂ = (1+ i₁)^(m₁/m₂)-1
 i₂ = (1+(0.0584/12))^(12/1)-1
i₂ = 0.059988811324671 *100
i₂ = 5.99888113246712 %

a. Option 2 = 6.05% for an investment

16. A credit card charges a periodic interest rate of 0.99% per month on the outstanding balance. Calculate the effective interest

Periodic Interest Rate i₁ i = j / m 0.99% 0.0099

Nominal Interest Rate (..% Compounded) j₁
Compounding Period ₁ Monthly
Comp. Frecuency (#Comp. Period x_year) m₁ 12
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₂ 4
Effective Interest Rate f f= (1+i)^m -1
1 Calculate Effective Interest Rate
f= (1+i)^m -1
f = ((1+(0.0099))^12)-1
f = 0.125486956926018 *100
f = 12.5486956926018 % Effective Interest Rate

28. The local bank in Edmonton decided to add 0.65% to the effective rate of interest on Mr. Sumadi's line of credit. If the curren
compounded quarterly.

Periodic Interest Rate i₁ i = j / m

Nominal Interest Rate (..% Compounded) j₁
Compounding Period ₁ Anual-Montlhy..
Comp. Frecuency (#Comp. Period x_year) m₁
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Anual-Montlhy..
Comp. Frecuency (#Comp. Period x_year) m₂
Effective Interest Rate f f= (1+i)^m -1

Assigment 5
Excercise 4 > Calculate the effective interest rate for each of the following nominal interest rates:
a. 4.86% compounded quarterly.

Periodic Interest Rate i₁ i = j / m 0.01

Nominal Interest Rate (..% Compounded) j₁ 4.86% 0.0486 Nominal Interest Rate (..% Co
Compounding Period ₁ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₁ 4 Comp. Frecuency (#Comp. P
Effective Interest Rate f f= ((1+i)^m) -1

f= (1+i)^m -1
f = ((1+(0.0486/4))^4)-1
f= 0.05 *100
f= 4.95

Excercise 4 > Calculate the effective interest rate for each of the following nominal interest rates:
a. 4.05% compounded quarterly.

Periodic Interest Rate i₁ i = j / m 0.01013 Periodic Interest Rate

Nominal Interest Rate (..% Compounded) j₁ 4.05% 0.0405 Nominal Interest Rate (..% Compounded)
Compounding Period ₁ Quaterly Compounding Period ₁
Comp. Frecuency (#Comp. Period x_year) m₁ 4 Comp. Frecuency (#Comp. Period x_year)
Effective Interest Rate f f= (1+i)^m -1 Effective Interest Rate

f= (1+i)^m -1
f= ((1+(0.0405/4))^4)-1
f= 0.04112
f= 4.11 %

Excercise 5 > Carlos invested $220,000 to purchase a home. After 9 years, he sold the home for $315,000. Calculate the effective

Future Value FV $315,000.00

Present Value PV $220,000.00
Periodic Interest Rate i₁ i = j / m
Nominal Interest Rate (..% Compounded) j₁
Compounding Period ₁ Anual
Comp. Frecuency (#Comp. Period x_year) m₁ 1
Effective Interest Rate f f= (1+i)^m -1
Time Period in Years t 9
Total Compound. Periods nn = m . t 9.00

i =((FV/PV)^(1/n))-1
i = ((315000/220000)^(1/9))-1)
i= 0.0406887859
i= 4.07 %
Since the amount is compounded once a year, the periodic interest ratei will be equa

Excercise 7 > What nominal interest rate compounded monthly is equivalent to 2.16% compounded quarterly?
 Periodic Interest Rate i₁ i = j / m 0.0054
Nominal Interest Rate (..% Compounded) j₁ 2.16% 0.0216
Compounding Period ₁ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₁ 4
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Monthly
Comp. Frecuency (#Comp. Period x_year) m₂ 12

i₂ = (1+ i₁)^(m₁/m₂)-1 j₂ = m₂ . i₂
i₂ = ((1+(0.0216/4))^(4/12))-1 j₂ = 12*0.001796770
i₂ = 0.001796770 j₂ = 0.02
0.179676969 j₂ = 2.16

Excercise 6 >
a. Nominal interest rate compounded quarterly that is equivalent to an effective interest rate of 4.5%

Effective Interest Rate f f= (1+i)^m -1 4.50% 0.0450

f= (1+i)^m -1
0.05 = (1+(j (x)/12)^12-1
j = 12*((1+0.0450)^(1/12)-1)
j= 0.04
j= 4.41 %

b. Nominal interest rate compounded monthly that is equivalent to 5% compounded quarterly

Periodic Interest Rate i₁ i = j / m 0.0125

Nominal Interest Rate (..% Compounded) j₁ 5.00% 0.0500
Compounding Period ₁ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₁ 4
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Monthly
Comp. Frecuency (#Comp. Period x_year) m₂ 12

i₂ = (1+ i₁)^(m₁/m₂)-1 j₂ = m₂ . i₂
i₂ = ((1+(0.05/4))^(4/12))-1 j₂ = 12*0.0041494251
i₂ = 0.0041494251 j₂ = 0.05
0.414942512 j₂ = 4.98

f= (1+i)^m -1
0.051

c. Nominal interest rate compounded quarterly that is equivalent to 7% compounded annually

Periodic Interest Rate i₁ i = j / m 0.0700

Nominal Interest Rate (..% Compounded) j₁ 7.00% 0.0700
Compounding Period ₁ Anually
Comp. Frecuency (#Comp. Period x_year) m₁ 1
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₂ 4

i₂ = (1+ i₁)^(m₁/m₂)-1 j₂ = m₂ . i₂
i₂ = ((1+(0.07/1))^(1/4))-1 j₂ = 4*0.01705853
i₂ = 0.01705853 j₂ = 0.06823
j₂ = 6.82
 Todas las Periodic Rate Interest tienen que estar en el mismo Compounding Frecuency (Anually, Monthly…)

nts. What nominal interest rate compounded daily will provide the same financial benefit?

from three different banks:(1) 5.84% compounded monthly, (2) 5.92% compounded quarterly, and (3)6%

2
Periodic Interest Rate i₁ i = j / m
Nominal Interest Rate (..% Compounded) j₁ 5.92% 0.0592
Compounding Period ₁ Quaterly
Comp. Frecuency (#Comp. Period x_year) m₁ 4
Equivalent Periodic Interest Rate i₂ i₂ = (1+ i₁)^(m₁/m₂)-1
Equivalent Nominal Interest Rate j₂ j₂ = m₂ . i₂
Compounding Period ₂ Anually (3) Requerido para comparar las 3 tasas
Comp. Frecuency (#Comp. Period x_year) m₂ 1
Effective Interest Rate f f= (1+i)^m -1

i₂ = (1+ i₁)^(m₁/m₂)-1
 i₂ = (1+(0.0592/4))^(4/1)-1
i₂ = 0.06052726 *100
i₂ = 6.0527255 %

b. Option 1 = 5.99% for a loan

ate the effective interest rate (1) and its equivalent nominal interest rate compounded quarterly (2).

2 Equivalent Nominal Interest Rate

i₂ = (1+ i₁)^(m₁/m₂)-1 Primero encontrar la variable Equivalent Periodic Interest
i₂ = (1+0.0099)^(12/4)-1 Rate = i₂ de la formula de Equivalent Nominal Interest Rate
i₂ = 0.029995 *100
i₂ = 2.99950003 %

j₂ = m₂ . i₂
j₂ = 4*2.99950003
j₂ = 11.998 % Equivalent Nomnial Interest Rate

ne of credit. If the current rate charged is 7.85% compounded quarterly, calculate the new nominal interest rate
 b. 4.86% compounded monthly.

Periodic Interest Rate i₁ i = j / m 0.0041

minal Interest Rate (..% Compounded) j₁ 4.86% 0.0486
Compounding Period ₁ Monthly
mp. Frecuency (#Comp. Period x_year) m₁ 12
Effective Interest Rate f f= ((1+i)^m) -1

f= (1+i)^m -1
f = ((1+(0.05/12))^12)-1
f= 0.05 *100
f= 5.12

b. 4.05% compounded monthly.

Periodic Interest Rate i₁ i = j / m

Rate (..% Compounded) j₁ 4.05%
Compounding Period ₁ Monthly
y (#Comp. Period x_year) m₁ 12
Effective Interest Rate f f= (1+i)^m -1

f= (1+i)^m -1
f = ((1+(0.0405/12))^12)-1
f= 0.04126
f= 4.13 %

0. Calculate the effective interest rate earned on this investment.

interest ratei will be equal to the efiective interest rate f.

0.001796770

0.0041494251
0.06823