Hi I am having problems solving this equation I would be great full if someone could explain it to me. Thanks $553.68=$1000 x (i + r)^-20
Do you know i or r? You can’t solve for two variables with one equation.
I think you meant to have “(1 + r)” in your parentheses, not “( i + r)”. Also, that’s one shitty interest rate if you start with a thousand bucks and end up with 553.68.
Sorry I did mean 1 instead of i. @ VaR_99 The interest rate is actuall 3%, sorry I should have said. €553.68 is the rate that the zero coupon bond is currently selling at.
PV=-553.68 FV=1000 N=20 CPT I/Y gives 2.99 ==> 3% in this case your equation is wrong. it should be 553.68*(1+r)^20 = 1000 solving for r is by doing either the way above or using (1000/553.68)^(1/20) -1 = 2.99% again.
Thanks a million, I can’t believe it was that easy
It would be 553.68 = 1000 x 1/(1+I/Y)^20 FV = 1000 N= 20 PV= -553.68 CPT => I/Y = 2.99%