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,
_
+
8.77%
1
4
4
0.085
1
,
_
+
Calculation of Effective rate for 6 months, where interest rate in 8.25%
Effective rate 1
m
m
nom
i
1
,
_
+
8.42%
1
2
0.0825
1
2
,
_
+
Mercantile Bank Ltd.:
This bank offers us different interest rates for different time periods. They offer 7%
for 1 month, 8.5% for 3, 6, 12 months or more.
If a saver invests 1,00,000 for five years.
Than the future value:
FV = pv (1+i)
n
= 1,00,000 (1+.085)
5
= 1,50,366
Calculation of Effective rate for 6 month where interest rate in 8.50%
Effective rate = 1
m
m
nom
i
1
,
_
+
8.77%
1
4
4
0.085
1
,
_
+
Calculation of Effective rate for 6 month where interest rate in 8.50%
Effective rate = 1
m
m
nom
i
1
,
_
+
8.68%
1
2
0.085
1
2
,
_
+
For Annuity Savings
Dutch Bangla Bank Ltd.:
This bank offers us 7.00% interest. If the monthly payment is 500 at an interest rate of
7.00% after 5 years the future value given by the bank is Tk. 35,910.
To justify the amount the calculation will be:
FV
( ) i 1
i
1 i) (1
PMT
n
+
,
_
36,005
12
.07
1
12
0.07
1
12
0.07
1
500
12 5
,
_
,
_
,
_
Mutual Trust Bank:
This bank offers us 9.25% interest. If the monthly payment is 500 at an interest rate of
9.25% after 5 years the future value mentioned by the bank is 38.080.
To justify the amount the calculation will be:
FV
( )
( ) i 1
i
1 i 1
PMT
n
+
,
_
38,253
3 1.00770833
.007708333
.58522532
500
12
.0925
1
12
.0925
1
12
.0925
1
500
12 5
,
_
,
_
,
_
,
_
Mercantile Bank Ltd.:
If one person invests Tk. 500 monthly for 5 years he will get Tk. 38,250 at the time of
maturity.
Now we have to calculate the interest rate.
If the interest rate is 9% then the person will get:
FV
( )
( ) i 1
i
1 i 1
PMT
n
+
'
37,995
12
0.09
1
12
0.09
1
12
0.09
1
500
12 5
,
_
'
,
_
'
253 , 8 3
12
0.0925
1
12
0.0925
1
12
0.0925
1
500
12 5
,
_
'
,
_