Re: Simple Compound Interest Calculation Question + [bonus question]
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First Question,
N=2.06
I=7.6
PV=-3,000
FV=3,488.63
Bonus
N=12
I=9
PV=2000
PMT=700
FV=19,723.83
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Thank you for your reply. I've been told that the first cannot be done without being told how to handle the fraction year interest: simple or compound. So the question was ambiguous.
As for the bonus question, I agree with your calculations: $19723.83 through a variety of methods. The book kept saying “16,667.15.” And I know they didn’t accumulate $1300 in their work [The split the initial $2000 deposit to $1300 and $700 ($700 to include in the annuity).
There are a lot of bad questions and answers in this book. Time to throw it away.
Garland
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I think it's more accurate to say that you cannot do this type of calculation without knowing both the rate and the corresponding quoting convention. different types of fixed income instruments are quoted with different conventions and you can't do value calculations without knowing which one is in use. Having said that, i can't say i'm familiar with the convention assumed by the solution in your book
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