Unformatted text preview: annual
rate—is quoted on credit cards and loans. The annual percentage yield (APY)—an effective annual
rate—is quoted on savings products. The interest
factor formulas for compounding more frequently
than annually are given in Table 4.9.
LG5 Describe the procedures involved in (1) determining deposits to accumulate a future sum,
(2) loan amortization, (3) finding interest or growth
rates, and (4) finding an unknown number of periods. The periodic deposit to accumulate a given future sum can be found by solving the equation for
the future value of an annuity for the annual payment. A loan can be amortized into equal periodic
payments by solving the equation for the present
value of an annuity for the periodic payment. Interest or growth rates can be estimated by finding the
unknown interest rate in the equation for the present value of a single amount or an annuity. Similarly, an unknown number of periods can be estimated by finding the unknown number of periods
in the equation for the present value of a single
amount or an annuity.
LG6 (Solutions in Appendix B)
Future values for various compounding frequencies Delia Ma...
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