# Your company has decided to set up a fund for its employees with an initial payment of Rs 27,500 compounded six-monthly over a four-year period at a six monthly interest of 3.5%.(a) Calculate the size of the fund at the end of 4 years.(b) Calculate the effective annual interest rate.iv) Show that P = A/r. for an ordinary annuity to infinity.

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Your company has decided to set up a fund for its employees with an initial payment of Rs 27,500 compounded six-monthly over a four-year period at a six monthly interest of 3.5%.
(a) Calculate the size of the fund at the end of 4 years.
(b) Calculate the effective annual interest rate.
iv) Show that P = A/r. for an ordinary annuity to infinity.

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Step 1

a.

Calculate the size of the fund as follows:

Step 2

b.

Calculate the effective annu... help_outlineImage TranscriptioncloseAPR 1+ EAR -1 2 3.5%x2 1+ -1 2 =(1.035) -1.071225-1 =0.071225 or 7.12%| fullscreen

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