Can anyone explain where i am making mistake.The exact answer is 5.06156.This is the question from study material Q7.2
I think you are assuming that the annuity is payable half-yearly and using half-yearly effective rate of interest. But it is not the case. The rate is convertible half-yearly but the annuity is payable annually. So, you need to find annual effective rate of interest then find AV using annual annuity formula. Hope this helps!
Thanks for the reply.Here i am converting the nominal interest rate into half yearly effective rate and increasing the time period corresponding to the frequency of nominal rate payment.So i think this should also work but i am not getting correct answer .
It would work if the annuities are payable half-yearly. But the annuity is being payable annually here.
