8/18/2019 (8)i-PROBLEM CASH FLOW FORMULA EL-377 A MS EXCEL.pdf

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(8)i-An amount of P1,000 becomes P1,608.44 after 4 yearscompounded bimonthly. Find the nominal interest

F=P(1+i)n  I? 

0 1 2 3

1,000 - - - - - - - - - - - - - - - 1,608.44

1,608.441/24 = 1,000 (1+i)4(6)

1.02=1+i

I+0.02

1.60844[xy]24 [1/x] = 1.02

But: i=NR/m

0.02=NR/6

Therefore nominal rate is 12%

Example Problem-A loan for P50,000 to be paid in 3 years at the amount of P65,000.

What is the effective rate of money?

F=P(1+i)n

0 1 2 3

50,000 - - - - - - - - - - - - - - - 65,000

65,000 = 50,000 (1+i)3 

1.3=(1+i)3  1.31/3

= 1.0914

1.0914=1+i

i=9.14%