What happens with an investment or a loan when the compounding periods are not the same as the payment periods?
For example,
Gerald invests $450 000 at a rate of 6.4% p.a. compounding monthly. At the end of every quarter he receives $35 000 from his investment.
(a) Write a recursive rule that will enable you to find the balance of the account, 
after 
payments.
(b) Find the balance of the account after 
years.
(c) How long will it take for the balance in the account to reach zero?
(d) What will be the amount of Gerald’s last payment?
The interest is compounding at a different rate to the payments.  We need to raise the multiplier  by the number of compound periods per payment, i.e.  (a)  (b) years is  payments,    (c)  21 years (d) The final repayment is  |