annuity

This topic has 3 replies, 4 voices, and was last updated 9 years ago by neilsolaris.

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February 15, 2017 at 4:38 pm #372533
brain33
Member
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Hi Sir
bit confuse with 3.5 % 5 year interest for reedeemable debt
how to calculate with 3.5% discount rate annuity.
I requested because annuity table not showing 3.5 %. It is only showing in whole number
Regards
February 16, 2017 at 2:02 pm #372718
Anonymous
Inactive
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Correct me if I’m wrong i think its

1/1.035^5 =0.841973166858524
1-0.841973166858524= 0.158026833141476
Then 0.158026833141476/.035(rate) = 4.51505237547074
February 16, 2017 at 4:30 pm #372755
John Moffat
Keymaster
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brain33 – if you want me to answer a question then you should ask in the Ask the Tutor Forum. This forum is for students to help each other!

Verty is correct. It is unusual in the exam to be asked interest rates that are not in the tables, but if you are asked then you need to calculate the discount factor yourself using the formula that is given at the top of the tables.
April 1, 2017 at 9:01 am #379823
neilsolaris
Member
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Would I be right in saying that, if you wanted to be lazy (like me!), you could find an approximate 5 year 3.5% annuity rate by working out the average of the 3% and 4% rates? E.g. (4.580+4.452)/2=4.516.
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