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April 2012 3 (ii) (b)

J

Janboyd

Member
How do you calculate the interest content of the second quarterly installment?

I don't understand where the terms (1-v^(3.75)) or (1.12^(0.25)-1) in the solutions come from.

Thanks
 
Not got the question but you usually want to know the amount outstanding after the first payment and then multiply by the effective interest rate for the repayment interval - in this case the effective quarterly rate.
I'm assuming it's 12% pa effective and so (1.12^(0.25)-1) is just the effective quarterly rate.
(1-v^(3.75)) looks like the numerator of a 3.75-year annuity??
 
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