Question

What is the PV in year 7 if the annual interest rate r=0.45 is compounded 9^2 periods per year?

Answer 1

Given:

r =0.45

no. of years = 7

no. of period per year = 9^2 = 81

since, we have given period per year we have to convert it into; no. of period = no. of period per year  ÷ no. of years ie. 81  ÷ 7 = 11.57  

Hence we have our n = 11.57

To find:

PV = ?

Formula:

Putting Values into formula;

PV = FV  ÷ (1+0.45)^11.57

PV = FV  ÷ (1.45)^11.57

PV = FV  ÷ 73.62

which can be expressed as FV = 73.62 X PV

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