(a) A savings plan requires you to make payments of £250 each at the end of every month for a year. The bank will then make six equal monthly payments to you, with its first payment due one month after the last payment you make to the bank. Compute the size of each monthly payment made by the bank, assuming a nominal interest rate of 4% p.a. payable monthly. Answer: £515.23 (=£3055.62/5.930618). (b) The situation is the same as in question (a): you make payments of £250 each at the end of every month for a year, and the rate is 4% p.a. payable monthly. However, now the bank will make equal annual payments to you in perpetuity, with the first payment due three years after the last payment you make to the bank. Compute the size of the annual payments. Answer: £134.84.
(a) A savings plan requires you to make payments of £250 each at the end of every month for a year. The bank will then make six equal monthly payments to you, with its first payment due one month after the last payment you make to the bank. Compute the size of each monthly payment made by the bank, assuming a nominal interest rate of 4% p.a. payable monthly. Answer: £515.23 (=£3055.62/5.930618). (b) The situation is the same as in question (a): you make payments of £250 each at the end of every month for a year, and the rate is 4% p.a. payable monthly. However, now the bank will make equal annual payments to you in perpetuity, with the first payment due three years after the last payment you make to the bank. Compute the size of the annual payments. Answer: £134.84.
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Transcribed Image Text:(a) A savings plan requires you to make payments of £250 each at the end of every month for a
year. The bank will then make six equal monthly payments to you, with its first payment due one
month after the last payment you make to the bank. Compute the size of each monthly payment
made by the bank, assuming a nominal interest rate of 4% p.a. payable monthly. Answer:
£515.23 (-£3055.62/5.930618).
(b) The situation is the same as in question (a): you make payments of £250 each at the end of
every month for a year, and the rate is 4% p.a. payable monthly. However, now the bank will
make equal annual payments to you in perpetuity, with the first payment due three years after
the last payment you make to the bank. Compute the size of the annual payments. Answer:
£134.84.
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