A man takes out a loan of P45,000.00 that pays 4% interest compounded semi-annually. He intends to pay off the loan plus periodic interest by amortization in 3 years.11. Compute his rate of interest every 6 months (i) and the total number of interest periods (n).Group of answer choices4%; 32%; 61%; 61%; 12
Question
A man takes out a loan of P45,000.00 that pays 4% interest compounded semi-annually. He intends to pay off the loan plus periodic interest by amortization in 3 years.11. Compute his rate of interest every 6 months (i) and the total number of interest periods (n).Group of answer choices4%; 32%; 61%; 61%; 12
Solution
The rate of interest every 6 months (i) is 4% divided by 2, as the interest is compounded semi-annually. So, i = 4%/2 = 2%.
The total number of interest periods (n) is calculated by multiplying the number of years by the number of compounding periods per year. In this case, it's 3 years times 2 (since it's compounded semi-annually), so n = 3*2 = 6.
So, the rate of interest every 6 months is 2% and the total number of interest periods is 6.
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