Your company has decided to set up a fund for its employees with an initial payment of Rs 27,500...
Question:
Your company has decided to set up a fund for its employees with an initial payment of Rs 27,500 compounded six-monthly over a four-year period at a six monthly interest of 3.5%.
a) Calculate the size of the fund at the end of 4 years.
b) Calculate the effective annual interest rate.
c) Show that P=A/r. for an ordinary annuity to infinity.
Effective Annual Rate:
The effective annual rate refers to the actual interest received or paid for an investment which is a result of regular compounding for a particular period of time. Effective annual rate is also referred to as an annual equivalent rate.
Answer and Explanation: 1
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View this answera) Calculation of size of the fund:
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Effective Annual Rate: Formula & Calculations
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Chapter 7 / Lesson 6
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Know the definition of the effective annual rate (EAR), see the formula for calculating the effective annual rate, and explore some examples on how to calculate the effective annual rate.
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