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manhattan interest word problem

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by resilient » Tue Mar 04, 2008 3:43 pm
An investment asset pays to the owner 5.75 % on annual basis. IF the same asset pays annual interest rate of 5.25% instead of 5.75% on a semi annual basis without compounding, what isthe difference in each payment to the owner who holds 16,800 dollars worth of this asset?

4.20
42
84
420
840


qa is 42. how so? please explain in detailed fashion.
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by xilef » Tue Mar 04, 2008 4:49 pm
5.25% of 16800 is 882

semi annual basis, that's 2 payments of 441 each

5.75 of 16800 is 966

semi annual basis, that's 2 payments of 483 each

483-441 = 42

or 84 annually

in this question it is unclear whether you should provide the difference between annual payments or semi annual since the first option involves annual payments.
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yes

by resilient » Tue Mar 04, 2008 5:15 pm
I see your point on the ambigous question. I thought I was reading wrong but the question doesnt explain if it wants the difference on a 6 month basis or 12 month basis.
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