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Hello Bob,
Very grateful for that - some queries :
1. We are using number (1) the UK.
2. In the final formula which you very kindly provide, you state "r" after the 25000. Is this the annual equivalent rate of 0.05116189788 or just 0.05?
3. Excuse my ignorance, what does the "." (the dot) between the "W" and the "a" mean?
4. And I am totally lost in terms of how to find W?
5. I can calculate the AER (UK Annual Equivalent Rate) OK, but what is the exact formula that I need to learn to input the values that I am given in the question? IE : $25,000, 5% credited monthly (convert to AER) and 8 years (or 96 monthly periods)?
Sorry!
The exam is the J10 Discretionary Investment Management exam of the Chartered Insurance Institute in London. I am very surprised that they have something of this level of mathematical complexity being examined.
Best regards,
Andrew.
Many thanks phrontister.
Best regards,
Andrew.
Hello All!
Following on from my last post (or rather, question and Bob's great solution) I have another annuity calculation / formula query - as follows :
"Andrew has $25,000 invested in a savings account, which is paying a nominal interest rate of 5% which is credited monthly.
Andrew wants to withdraw capital and interest monthly so that at the end of 8 years the account will have a zero balance.
How much can Andrew withdraw each month?"
As before, this is a "mock" exam question as preparation for an exam I have in April.
The answer given is $316, but I do not have a formula to learn and memorize.
Can anyone assist me?
Very grateful and thanks,
Andrew.
Bob,
That is fantastic!
I understood your reply on the very first reading and I have been able to replicate the formula easily on my calculator (needed for the exam!).
I have couple of more queries and will post these in the next couple of days.
I am very grateful to you - many thanks and best regards,
Andrew.
Hello All.
What a great site : I have an exam to sit in the UK late April and the sections on Compound Interest and Annuities have been invaluable.
I have thanked Rod privately but I will do so publicly here : Thank You Rod!
OK - here is my question - it is one of the "mock exam questions" that I am working through before the exam.
"Andrew invested $500 at the end of every year for 5 years at an interest rate of 6%.
What is his accumulated value at the end of the period?"
The correct answer is $2,818.35
But I cannot find a formula to calculate the answer.
I have looked on the Maths Is Fun site and elsewhere.
I'd be really grateful for any help.
Best regards and thanks again,
Andrew.
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