For each of the following cases, ndicate (a) what interest rate columns and (b)

Question

For each of the following cases, ndicate (a) what interest rate columns and (b) what number of periods you would refer to in looking up the discount rate (1) In Table 3 (present value of 1): Number of Discounts Annual Rate Years Involved per Year Case A Case B Case C 8% 896 8% Annually Annually Semiannually 8 Case A periods periods periods (2) In Table 4 (present value of an annuity of 1): Case B Case C Number of Number of Frequency of Annual Rate Years Involved Payments Involved Payments Case A Case B Case C 896 8% 6% 15 15 Annually Annually Semiannually Case A Case B Case C periods periods periods y%

Explanation / Answer

1 Interest rate columns Number of periods(years) Explanation Case A 8% 4 Since the discounts per year is annually, interest rate would be 8% and no of years would be 4 Case B 8% 8 Since the discounts per year is annually, interest rate would be 8% and no of years would be 8 Case C 4% 12 Since the discounts per year is semiannually, interest rate would be 4% (8%/2) and no of periods would be 12 (6*2) 2 Interest rate columns Number of periods(years) Explanation Case A 8% 15 Since the discounts per year is annually, interest rate would be 8% and no of years would be 15 Case B 8% 4 Since the discounts per year is annually, interest rate would be 8% and no of years would be 4 Case C 3% 8 Since the discounts per year is semiannually, interest rate would be 3% (6%/2) and no of periods would be 8 (4*2)

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