Respond to your classmates.

• 1- What suggestions do you have for the problem they had an issue with? Can you explain it to them?
• 2- Perhaps you had issues with the same problem? What helped you?

In this Problem sets discussion, I will clearly explain about 3 questions which are about how to find interest rates, Future value and Present Value.

Q1. To calculate the future value of $2,000 earning an interest rate of 5.5% compounded quarterly for 10 years,we can use the formula for compound interest:

Future Value = Present Value * (1 + (Nominal Rate / Compounding Frequency))^(Compounding Frequency * Time)

Where:

Present Value = $2,000

Nominal Rate = 5.5% = 0.055

Compounding Frequency = 4 (quarterly)

Time = 10 years

Plugging in the values and solving for Future Value:

Future Value = $2,000 * (1 + (0.055 / 4))^(4 * 10)

Calculating the exponent and solving for Future Value:

Future Value = $2,000 * (1.01375)^40

Future Value =$2,000*1.72677077

Future Value = $3453.54

So, the correct answer is: $3453.54

Q2. To calculate the amount of money we should set aside now, we can use the formula for the future value of a lump sum compounded daily:

Future Value = Present Value * (1 + (Nominal Rate / Compounding Frequency))^(Compounding Frequency * Time)

Where:

Present Value = Amount to be set aside now

Nominal Rate = 12.2% = 0.122

Compounding Frequency = 365 (daily)

Time = 9/12 years (since the camp is in 9 months)

We want the Future Value to be $2,000.

Plugging in the values and solving for Present Value:

$2,000 = Present Value * (1 + (0.122 / 365))^(365 * (9/12))

Solving for Present Value:

Present Value = $2,000 / (1 + (0.122 / 365))^(365 * (9/12))

Present Value = $1,825.15

So, the correct answer is: $1,825.15.

Q3. The effective rate of a 6% interest rate compounded quarterly can be calculated using the formula:

Effective Rate = (1 + (Nominal Rate / Compounding Frequency))^Compounding Frequency - 1

Plugging in the values:

Nominal Rate = 6% = 0.06

Compounding Frequency = 4 (quarterly)

Effective Rate = (1 + (0.06 / 4))^4 - 1

Effective Rate = 0.0614 or 6.14%

So, the correct answer is: 6.14%

From the above 3 problems I answered all correctly. But in common I found difficulty in calculating and arriving sums after formula application. Its quite challenging to do the problem with difficult calculations part. Can you suggest me any easy methods or shortcut to calculate the numbers?.. I thought that I cleared the sums with explanation clearly and this will helpful to you all to solve your doubts regarding this sums.