Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie

Financial maths edco exam papers pg 45

  • 14-03-2013 5:04pm
    #1
    Leaving Cert Student
    Registered Users, Registered Users 2 Posts: 1,026 ✭✭✭


    We did financial maths last year and it wasn't bad I thought but looking at the exam style questions now I cant make head or tail of it. can anyone talk me through what is happening in q5 (a) sample paper a? it said the value of first installment was A yet marking scheme said 1st was A/1.06 or something? It must be the terminology but I can't visualize what is happening to the money here at all! any help massively appreciated...k


Comments

  • #2
    Chris68
    Registered Users Posts: 144 ✭✭Chris68


    I haven't looked at the question you've asked about but I imagine its something like this...

    The first installment is €A but you don't get this money until the end of the year.

    Meanwhile the bank is offering 6% interest for the year. If you took the bank up on their offer and put €(A/1.06) into the bank today, then the bank would give you back €(A/1.06)x(1.06)=€A at the end of the year.

    So €(A/1.06) today has the same value as €A next year; i.e. the installment might be for €A but its not worth that much today. Today it is only worth €(A/1.06).

    Similarly the second installment might also be for an amount of €A but it isn't due for 2 years. Today it would only be worth €(A/1.06^2).

    And so on...


Advertisement