Hi all,
Am getting a little confused on the rules surrounding time units here.
for example in this question we are given an annuity paying £40 at the end of each month forever with i^4=10%.
my instinct was to have all units in quarters
so
payments in quarters = 4*40=160 per quarter
then can keep i^4 as is
and use
160*a^p_inf]=160/i^p=160/0.1=1600
this is wrong and the solutions convert use monthly units - i am unsure why this is? please could someone help?
Thanks
Am getting a little confused on the rules surrounding time units here.
for example in this question we are given an annuity paying £40 at the end of each month forever with i^4=10%.
my instinct was to have all units in quarters
so
payments in quarters = 4*40=160 per quarter
then can keep i^4 as is
and use
160*a^p_inf]=160/i^p=160/0.1=1600
this is wrong and the solutions convert use monthly units - i am unsure why this is? please could someone help?
Thanks