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Unformatted text preview: Compounding monthly 12% / 12 = 1% Given a monthly rate of 1%, what is the E.A.R.? Answer: (1+.01)^121 = 12.68% Example: r = 10% For 3 years DF = 1 / (1+r)^t DF = 1 / (1+.1)^3 DF = 0.75 And solve for the value today of a $500 future payment? PV = fv / (1+r)^t PV = 500 / (1+.1)^3 PV = 375.66 If compounded semiannually PV = fv / (1+r)^t PV = 500 / (1+.1/2)^6 PV = 373.11 Exam 1 75% is on CH3, 4 10% on CH1,2 15% on CH17...
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This note was uploaded on 09/08/2010 for the course BUS 170 at San Jose State University .
 '08
 francis,stephen
 Annuity, Interest, Perpetuity

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