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2 investment
p offer interest of 5% per year compounded half yearly for 4 years
Q offer one interest payment of 18%at the end of its 4 year life.
what is annual effective interest rate?? offered by two investment??
(ans is.. p 5.06 and Q 4.22)
r=( 1+i/n )^n-1p= (1+ 0.05/4)^4-1 *100
=5.09 am i right?can’t solve Q… please help 🙁
For P, the interest is 2.5% every half year, and to the effective annual interest rate is 1.025^2 – 1 = 0.0506 or 5.06%
For Q, if r is the annual rate, then (1+r)^4 = 1.18
So 1+r = fourth root of 1.18 = 1.0422
So r = 0.0422 or 4.22%
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