Mathematics: At an effective annual interest rate i, i 0, each of the following two sets of payments has present value K: a. A payment of 121 immediately and another payment of 121 at the end of one year b. A payment of 144 at the end of two years and another payment of 144 at the end of three vears. Calculate i.

The answer to this problem is 56y...

At an effective annual interest rate i, i 0,

sabahtramirez01

21.07.2021

Hence the calculated

Step-by-step explanation:

Now,

$121+121v=144v^{2} + 144 v^{3} =K\\121(1+v)=144v^{2} (1+v)\\v^{2} =\frac{121}{144} \\\\v=\frac{11}{12}$

Then K is calculated as,

$K=121(1+v)\\K=121(1+\frac{11}{12} )\\K=\frac{121(23)}{12} \\\\K= 231.916$

Here we get,

$i=\left | \left ( \frac{v-1}{v} \right ) \right |\\i=\left | \frac{\frac{11}{12}-1}{\frac{11}{12}} \right |\\i=\frac{1}{11}$

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