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Please help me with the following two problems. Can’t understand their approach. I used the Texas basic calculator but couldn’t reach teh answer. Question 25 (curriculum)

[question removed by moderator] Question 26 ( curriculum)

[question removed by moderator]

Q. 25: You’re looking for a monthly payment, not an annual payment. Use I/Y = 6% ÷ 12 = 0.5% and N = 5 × 12 = 60.

Q. 26: You’re looking for a quarterly amount. Use I/Y = 6% ÷ 4 = 1.5% and N = 10 × 4 = 40.

Your EAR is wrong adjust it for monthly.

The general principal to be followed is that the period and interest rate must match. In the first example, you can either use a month as a period and 0.06/12 = 0.50% as the interest rate (and 60 as “N”) as S2000 Magician has done. Alternately you could also use a year as a period (therefore 5 as “N”) and 6.17% (the EAR) as the interest rate. In the case of PV or FV of a lump sum problems either method will work (but the first approach is generally easier).

In the second problem, your payments are made quarterly, so your ONLY option is to use the quarterly periodic rate of 1.5% as the rate and a quarter as a period (N=40).

With Q.25, you have to think of it as a bank loan. You receive 200,000 pounds NOW, so that is PV=+200,000. The bank expects you to slowly pay off the loan in instalments, so by the time the loan is paid, FV=0.

Now, it is a loan that is compounded monthly, so that means the interest of 6% per year should be pro-ratad per month -> 6/12 = 0.50%, which is your I/Y.

But, how many times will this interest rate be applied? Well, there are 60 months in 5 years, so N=5. Plug these numbers in and you should get your PMT.

With Q.26, it is the other way around. You receive 25,000 at the end of the term, so FV=+25,000. You had nothing to start with, so PV=0.

Same concept with I/Y as in the previous question, so I/Y=1.5% and N=40. You should get PMT again (note PMT will be negative because this payment will be LEAVING YOU and deposited into the bank). Think of it in terms of direction of payment to you as an individual.