Interest rate 0.
1
Number of Periods 2
Discount factor 0.826446280991735
Interest rate factor 1.21
Present values
2772357
9875975
847
1
5437
From APR to EAR transformation APR = 3%
yearly 0.03
monthly 0.0025
daily 8.21917808219178E-05
bi-annually with 6% 0.03
Here I take arbitrarily an interest rate of 10%
Some random examples
Future value in 10 years Present values
3354551.97 2772357
11949929.75 9875975
1024.87 847
1.21 1
6578.77 5437
EAR
0.03
0.0304159569135067
0.0304532636005583
0.0609
(Yearly) EAR of 6%
Monthly: 0.0048675505653
You need to find the monthly cash flow you need to get 100,000 in ten years (future value) with a monthly ra
10 years = 120 months
Other way to think about :-)
months N interest rate factor
sum C
120 0 1 162.47344 615.4852
119 1 1.00486755056534
118 2 1.00975879417919
117 3 1.01467384616866
116 4 1.01961282242222
115 5 1.02457583939243
114 6 1.0295630140987
113 7 1.03457446413003
112 8 1.0396103076478
111 9 1.04467066338853
110 10 1.0497556506667
109 11 1.05486538937757
108 12 1.06
107 13 1.06515960359926
106 14 1.07034432182994
105 15 1.07555427693878
104 16 1.08078959176755
103 17 1.08605038975597
102 18 1.09133679494462
101 19 1.09664893197783
100 20 1.10198692610667
99 21 1.10735090319184
98 22 1.1127409897067
97 23 1.11815731274023
96 24 1.1236
95 25 1.12906917981522
94 26 1.13456498113974
93 27 1.14008753355511
92 28 1.1456369672736
91 29 1.15121341314133
90 30 1.1568170026413
89 31 1.16244786789651
88 32 1.16810614167307
87 33 1.17379195738335
86 34 1.1795054490891
85 35 1.18524675150464
84 36 1.191016
83 37 1.19681333060413
82 38 1.20263888000813
81 39 1.20849278556841
80 40 1.21437518531002
79 41 1.22028621792981
78 42 1.22622602279978
77 43 1.2321947399703
76 44 1.23819251017345
75 45 1.24421947482635
74 46 1.25027577603445
73 47 1.25636155659492
72 48 1.26247696
71 49 1.26862213044038
70 50 1.27479721280861
69 51 1.28100235270252
68 52 1.28723769642862
67 53 1.2935033910056
66 54 1.29979958416776
65 55 1.30612642436851
64 56 1.31248406078386
63 57 1.31887264331593
62 58 1.32529232259652
61 59 1.33174324999062
60 60 1.3382255776
59 61 1.3447394582668
58 62 1.35128504557713
57 63 1.35786249386467
56 64 1.36447195821434
55 65 1.37111359446594
54 66 1.37778755921783
53 67 1.38449400983062
52 68 1.39123310443089
51 69 1.39800500191489
50 70 1.40480986195231
49 71 1.41164784499005
48 72 1.418519112256
47 73 1.42542382576281
46 74 1.43236214831176
45 75 1.43933424349655
44 76 1.4463402757072
43 77 1.4533804101339
42 78 1.4604548127709
41 79 1.46756365042046
40 80 1.47470709069674
39 81 1.48188530202978
38 82 1.48909845366945
37 83 1.49634671568946
36 84 1.50363025899136
35 85 1.51094925530858
34 86 1.51830387721046
33 87 1.52569429810634
32 88 1.53312069224963
31 89 1.54058323474193
30 90 1.54808210153716
29 91 1.55561746944569
28 92 1.56318951613855
27 93 1.57079842015157
26 94 1.57844436088961
25 95 1.58612751863083
24 96 1.59384807453084
23 97 1.6016062106271
22 98 1.60940210984309
21 99 1.61723595599272
20 100 1.62510793378461
19 101 1.63301822882645
18 102 1.64096702762938
17 103 1.64895451761243
16 104 1.65698088710686
15 105 1.66504632536066
14 106 1.67315102254299
13 107 1.68129516974868
12 108 1.68947895900269
11 109 1.69770258326472
10 110 1.70596623643368
9 111 1.71427011335229
8 112 1.72261440981169
7 113 1.73099932255603
6 114 1.73942504928715
5 115 1.74789178866918
4 116 1.75639974033327
3 117 1.7649491048823
2 118 1.77354008389557
1 119 1.7821728799336
0 120 0
You put at each month, during 120 months so you do 120 payments, not 121!
My solution
re value) with a monthly rate of 0,004868 EAR
T
EMR
This is the future value of the annuity
You have to isolate C
You know FV
So
FV 100000
r 0.004867550565343
N 120
C 615.485204878411
My solution
6%
120 We pass yearly to monthly
0.487%
-$ 615.49
Problem
Suppose an investment pays interest quarterly with the interest rate quote
9%.
What amount of interest will you earn each quarter?
If you have no money in the bank today, how much will you need to save a
$25,000 in 5 years?
Transformation 9% in quarter
0.0217782
Use the formula with
FV 25000
r 0.0217782
quarters 20
C 1010.8249 per quarter EAR 9%
EQR 2.18%
$ 1,010.82 Esta es la respuesta.
Q N interest rate factor
sum C
Q20 0 1 24.732275 1010.8249
Q19 1 1.02177818086464
Q18 2 1.04403065089106
Q17 3 1.06676773923439
Q16 4 1.09
Q15 5 1.11373821714246
Q14 6 1.13799340947125
Q13 7 1.16277683576549
Q12 8 1.1881
Q11 9 1.21397465668528
Q10 10 1.24041281632366
Q9 11 1.26742675098438
Q8 12 1.295029
Q7 13 1.32323237578696
Q6 14 1.35204996979279
Q5 15 1.38149515857297
Q4 16 1.41158161
Q3 17 1.44232328960778
Q2 18 1.47373446707415
Q1 19 1.50582972284454
terest rate quoted as an effective annual rate (EAR) of
u need to save at the end of each quarter to accumulate
Ya esta efectiva; ahora se pasó quarterly This is the amount of interest we earn each quarter.
Esta es la respuesta. Es con un menos al principio
Step 1: find the effective rate for 4 years paid semi-annually ==> 8 payments
Effective rate From APR to EAR transformation APR = 5%
6 months 0.025
Step 2: compute the monthly EAR
0.00412391546514423
Step 3: compute the present value
C 4000
r 0.00412391546514423
N 48 For the PV always monthly
PV ==> 173867.219832197
1. Gotta pass from APR to EAR
5.06%
[Link]
0.41%
[Link] PV
AER
0.050625
Here the N is in months
Problem
A firm is considering purchasing or leasing a luxury automo
years. You can buy the car for $65,000 up front , or you ca
borrow at an interest rate of 8% APR with quarterly compou
$1,800 per month?
Step 1: find the monthly effective rate
Effective ra From APR to EAR transformation APR = 8% AER
4 months 0.02 0.0824322
Step 2: compute the monthly EAR
0.00662270956011302
Step 3: compute the present value
C 1800
r 0.00662270956011302
N 36
PV ==> 57485.8795327465
luxury automobile for the CEO. The vehicle is expected to last three
ont , or you can lease it for $1,800 per month for 36 months. The firm
arterly compounding. Should you purchase the system outright or pay
to last three
ths. The firm can
outright or pay
2011 nominal inflation real
0.003 0.03 -0.026214
2014 nominal inflation real
0.001 -0.0005 0.001501