Question

If an account is increasing at a rate of 3.3% compounded semiannually, what is the exact value of in the following present value

ordinary annuity formula?
PV-P1-(1+1)*
a) 3.3
b) 0.033/100
c) 0.033/2
d) 0.33/2

Answer 1

c.
`(0.033)/(2)`

on edgen

Answer 2

The correct answer is C. 0.033/2

Explanation:

1. Let's review the data given to us for solving the question:

Annual interest rate = 3.3% compounded semiannually

2. Let's find the exact value of the rate:

Number of periods (n) = n/2, given that periods are semesters and not years

Annual interest rate (r) = 3.3% = 3.3/ 100 = 0.033

For using the correct value in the present value annuity formula, we also have to divide the annual interest rate because the interest is compounded semiannually or every six months, what it means:

0.033/2

The correct answer is C. 0.033/2