I have calculated by finding the effective rate per week i.e. 0.08/52.18 which comes to .01533%. Then I calculate d i.e. .001533/1.001533 which comes to .001531. Then I calculate 'A due n' i.e. (1-(1.001533)^-52.18)/.001531. Is the way I am calculating correct?. If I am wrong please correct me.
If the annual effective interest rate is 8% per annum, then the weekly effective interest rate is (1.08)^(1/52.18) - 1 = 0.001476 = 0.1476% (assuming 52.18 weeks per year). You have mistakenly taken the 8% to be a nominal interest rate convertible weekly. However, the real point of this question is to illustrate that when payments occur very frequently (eg weekly) we can approximate these using a continuous annuity. Actuaries often do this in practice.
6.6 Hi, the effective interest does come up to 0.001476 However, in the solution, they've uses 0.076961 Am I missing something?
