Correct formula for annuity is
FV=Annuity*((1+(i/m))^(m*n)-1)/(i/m)
put both m and n to find i
19% and 18% are not annual rates of interst it has to be multiplied by m
----- Original Message -----From: mc090402550 Asad MunirSent: Tuesday, April 27, 2010 11:14 AMSubject: [vuZs] MGT201-An Idea Solution pls discuss it with me--Your father is 50 years old now and his plan is to retire exactly at the age of 60. His goal is to create a fund that will allow him to receive Rs15,00,000 at the time of retirement so that he can start a small business. He has searched the market and is confused between the two options:
- Option 1: To deposit Rs.9,000 after every 6 months in banks A
- Option 2: To deposit Rs.2,000 after every 4 months in banks B
Both banks assume payments at the end of respective months. As a business graduate, you have been asked to help him out as:
What interest rate assumption has the Bank A used in its offer?
What interest rate assumption has the Bank B used in its offer?
Which option is favorable?
Dear fellows here is the formula but i m not 100% sure. i hv solved this question in excel. and the answer is:1,500,000 = 9000 [(1+i/2)^10*2-1] 19%1,500,000 = 2000 [(1+i/3)^10*3-1] 18%According to this formulas option B is Favourable cose we have to pay less amount and get the same result.
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