From ASM FM 11th ed.
An investor pays P for annuity which provides payments of 100 at the beginning of each month for 10 years. These payment are invested at a nominal annual interest rate of 12% convertible monthly. Monthly interest payments are reinvested at a nominal interest rate of 6% convertible monthly. The annual yield rate over the ten year period is 8% effective. Calculate P.
The solution gives P(1.08)^10 = 12000 + (Is) angle 121 @ 0.005.
I understand how this came about except for n=121. The first payment invested was at time=0, so the first interest received and reinvested was at time=1. This occurs until time=120, therefore shouldn't n=120?
An investor pays P for annuity which provides payments of 100 at the beginning of each month for 10 years. These payment are invested at a nominal annual interest rate of 12% convertible monthly. Monthly interest payments are reinvested at a nominal interest rate of 6% convertible monthly. The annual yield rate over the ten year period is 8% effective. Calculate P.
The solution gives P(1.08)^10 = 12000 + (Is) angle 121 @ 0.005.
I understand how this came about except for n=121. The first payment invested was at time=0, so the first interest received and reinvested was at time=1. This occurs until time=120, therefore shouldn't n=120?
Question on Reinvestment Rates
