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Old 11-11-2018, 12:03 PM
JohnTravolski JohnTravolski is offline
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Exclamation Mortgage Financing Problem; Textbook Typo?

I found this example problem in Eric V. Slud's "Actuarial Mathematics and Life-Table Statistics" book, but I'm having a hard time following it. I'm not sure if there's a typo, or if they just calculated the answer incorrectly, or what, but I'll share it with you here:



When I calculate the value in red, I get $52429.39 instead, which is a pretty noticeable difference.

Did they mean annuity due instead of immediate (a dot dot instead of just a)? I tried that, but I still get a different answer. Were they using a different interest rate? I don't understand. What's the correct answer here, and how do you get it?

If this helps, I also get different answers for the following two calculations:

I don't understand how he's calculating the annuity value. It doesn't seem to follow from the formula.

Last edited by JohnTravolski; 11-11-2018 at 12:35 PM..
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Old 11-11-2018, 12:44 PM
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Gandalf Gandalf is offline
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51904.69 seems ok. Annuity immediate for 96 periods at 0.66667% per period
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Old 11-11-2018, 01:05 PM
JohnTravolski JohnTravolski is offline
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Quote:
Originally Posted by Gandalf View Post
51904.69 seems ok. Annuity immediate for 96 periods at 0.66667% per period
I have attached my calculations. Am I doing this incorrectly? I just don't understand why my answer is 500 dollars off.


Last edited by JohnTravolski; 11-11-2018 at 01:11 PM..
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Old 11-11-2018, 01:23 PM
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8% is already the nominal monthly rate. All you have to do is 8%/12 = 0.66667%.
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Old 11-11-2018, 01:28 PM
JohnTravolski JohnTravolski is offline
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wow, okay, I see it now. Thank you so much.
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