DISCOUNT FACTOR

This topic contains 4 replies, has 2 voices, and was last updated by Avatar of gromit gromit 1 year, 5 months ago. This post has been viewed 39 times

Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts

  • avatar
    quartey11
    Participant
    • Topics: 2
    • Replies: 7

    Please how do you calculate the discount factor rate when the interest ( say 5%) is paid annually in areas for 5 years


    Avatar of gromit
    gromit
    Participant
    • Topics: 1
    • Replies: 1471

    Look up the tables or use

    1/r(1- 1/(1+r)^n)

    So for 6% and 5 years:

    1/0.06(1 – 1/(1.06)^5) = 4.212


    avatar
    quartey11
    Participant
    • Topics: 2
    • Replies: 7

    thank you sir, very much appreciated


    avatar
    quartey11
    Participant
    • Topics: 2
    • Replies: 7

    Hello gromit, we have ( 1-1) which is equal to zero in the above formula which means the entire equation will be equal to zero if we are to use BODMAS IN SOLVING THE EQUATION.yOUR URGENT REPLY WILL BE APPRECIATED. Thank you


    Avatar of gromit
    gromit
    Participant
    • Topics: 1
    • Replies: 1471

    It’s not 1-1 it’s 1 – [1/(1.06)^5]

    The terms in the square rackets are worked out first then subtracted from 1. (This how the original equation should be interpreted: multiply and divide before add and subtract is the normal precedence)

Viewing 5 posts - 1 through 5 (of 5 total)

You must be logged in to reply to this topic.