Answer to Question #272235 in Financial Math for Neth

Question

If the rate is at 1.25% effective, how long will Php 5,000 become Php 5,500?

Answer 1

find the nominal rate

$R=(1+r)^n-1$

$1.25=(1+r)^1-1$

$2.25=1+r$

r=1.25Since the number of years of the deposit is a degree, then it will find the term of increase through the logarithm using the formula

$t=\frac{ln N}{ln(1+r)}$

$N=\frac{5500}{5000}=1.1$

r=0.0125

$t=\frac{ln N}{ln(1+r)}=\frac{ln 1.1}{ln(1+0.0125)}=\frac{0.095310179804325}{0.012422519998557}=7.9$