I didnt understand the formula used in the solution of question number 7.
for me, it seemed that it should be the case for a 4 year period.
Shouldn`t the interest be divided by 100 times n, in this case 4 and 2?
please help me clear this out.
Best regards,
Leo
if you mean the interest rate, according to the formula, the interest rate ‘r’ should be first divided by 100 times n (100n) and then added to 1.
for the quarterly one, n = 4. so 8 divided by 400 equals 0.02 and add one to it, you will get 1.02 which has to be raised to the power of n *t ( n= 4 and t =1). So, (1.02)^4.
for twice a year, n becomes 2 and following the same process, you will get (1.04)^2.
In fact it was correct.
I think I messed up the math with the interest rates before.
Thanks!