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bpp question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › bpp question

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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  • Author
    Posts
  • December 30, 2016 at 8:38 am #364665
    ryan32
    Member
    • Topics: 35
    • Replies: 64
    • ☆☆

    An Investment WYE offers one interest payment of 20% at the end of its 4 year cycle.
    What is the annual effective interest rate offered by the investment

    if i use the effective annual interest formula r=(1+i/n)-1
    the answer came out to be 5%
    while the bpp answer shows 4.66%

    i couldn’t understand there solution.can u plz explain it how to solve this.

    December 31, 2016 at 5:30 pm #364723
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    You are using a wrong formula!!

    (1+r)^4 = 1.20

    So 1 + r = 1.0466

    r = 0.0466

    Have you watched my free lectures on interest?

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