Given that the present value of a payment of £420 due in exactly one year and 3 months' time is £403, calculate the following: a) The monthly force of interest. b) The nominal rate of interest per annum convertible monthly. c) The nominal rate of discount per annum convertible monthly.

Given that the present value of a payment of £420 due in exactly one year and 3 months' time is £403, calculate the following: a) The monthly force of interest. b) The nominal rate of interest per annum convertible monthly. c) The nominal rate of discount per annum convertible monthly.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Using formulas, no tables, hint: Starting from a monthly t.u.
and using appropriate formulae and notations (particularly for nominal rates).

Given that the present value of a payment of £420 due in exactly one year and 3
months' time is £403, calculate the following:
a) The monthly force of interest.
b) The nominal rate of interest per annum convertible monthly.
c) The nominal rate of discount per annum convertible monthly.

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