BU283 Lecture Notes - Lecture 4: Scientific Calculator, Effective Interest Rate
Document Summary
Finding the present value of an annuity equation. He will make annual payments of . 75 at the beginning of the year for the next three years. (the first payment is made today. ) He will also make a single payment of at maturity (three years from today). What annual rate, i, are you earning on this deal: 9, 10, 11, 12% Scientific calculator won"t work with this question, but you can use a financial calculator or excel (spreadsheet) On excel: you try any one interest rate, if it doesn"t give you the pv of . By doing this, excel changes the pv to 1000 by changing the interest rate that sets it to that which gives us our answer: i= 11% Or: eov: principal = pmt x pvifa-due + lump-sum x (1 + i)-n, principal = pmt x (1/i) x [1 (1 + i)-n] x (1+i) + lump-sum x (1 + i)-n. The price is ,900 (plus dealer charges of.
