Asked by Thomas
Determine the proceeds of a promissory note for $3,600 with interest at 6% p.a. compounded quarterly, issued September 1, 2008, due on June 1, 2014, and discounted on December 1,2010 at 8% compounded semi-annually.
Answers
Answered by
Reiny
Since I am a visual-minded person, I made a time graph to get the count of interest periods correct. From Sept 1, 2008 to June 1, 2014 I counted 23 quarters
Since the interest earned is 6% compounded quarterly, this will work out
Amount due on June 1, 2014 would be
3600(1.015)^23 , the quarterly rate is .06/4 = .015
= .....
but this was discounted to Dec1, 2010 , which would be 14 quarters or 7 half-years
discounted amount on Dec1, 2010
= 3600(1.015)^23 (1.04)^-7
= ....
I will let you do the button-pushing.
Check my time graph to make sure I counted correctly.
Since the interest earned is 6% compounded quarterly, this will work out
Amount due on June 1, 2014 would be
3600(1.015)^23 , the quarterly rate is .06/4 = .015
= .....
but this was discounted to Dec1, 2010 , which would be 14 quarters or 7 half-years
discounted amount on Dec1, 2010
= 3600(1.015)^23 (1.04)^-7
= ....
I will let you do the button-pushing.
Check my time graph to make sure I counted correctly.
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