4. Janjan has a promissory note due in 2 years, whose maturity is 100,000 pesos. a. Determine the present value if the rate of interest is 12% compounded semi-annually. b. Determine the effective rate of interest if it is compounded quarterly.

4. Janjan has a promissory note due in 2 years, whose maturity is 100,000 pesos. a. Determine the present value if the rate of interest is 12% compounded semi-annually. b. Determine the effective rate of interest if it is compounded quarterly.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 25E

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

kindly show and tell what is ther formula used to solve the problem thank you

4. Janjan has a promissory note due 2 years, whose maturity is 100,000 pesos.
a. Determine the present value if the rate of interest is 12% compounded semi-annually.
b. Determine the effective rate of interest if it is compounded quarterly.

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Step 3: Calculation of effective interest rate

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