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DISCOUNT FACTOR

This topic has 4 replies, 2 voices, and was last updated 12 years ago by Ken Garrett.

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October 20, 2012 at 7:33 pm #54810
quartey11
Member
- Topics: 3
- Replies: 8
Please how do you calculate the discount factor rate when the interest ( say 5%) is paid annually in areas for 5 years
October 20, 2012 at 9:12 pm #105820
Ken Garrett
Keymaster
- Topics: 10
- Replies: 10534
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
October 22, 2012 at 1:49 pm #105821
quartey11
Member
- Topics: 3
- Replies: 8
thank you sir, very much appreciated
October 25, 2012 at 5:37 pm #105822
quartey11
Member
- Topics: 3
- Replies: 8
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
October 25, 2012 at 5:48 pm #105823
Ken Garrett
Keymaster
- Topics: 10
- Replies: 10534
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)
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