Question

From the interest tables in Appendix B, determine the values of the following factors by interpolation and compare your results with those obtained from evaluating the A/P and P/A interest formulas.
1. The capital-recovery factor for 38 periods at 6.25% interest.
2. The equal-payment series present-worth factor for 85 periods at 9.25% interest.

Answer 1

Answer:

When compared with results obtained using Interpolation there is a variance of more than 1/3 of a point   ( for both A and B )

Results obtained via A/P and P/A interest formulas

A) 0.0694

B) 10.8049

Explanation:

A) calculating The capital recovery factor for 38 periods at 6.25%

using the A/P interest formula

where ;

p = present value , i = annual interest rate, n = number of years

hence CRF ( capital recovery factor ) = 0.0694

B) Calculating the equal-payment series PWF

using the P/A interest formula

where ; p = present value , i = annual interest rate, n = number of years

hence PWF ( present worth factor ) = 10.8049

attached below is the detailed solution

When compared with results obtained using Interpolation there is a variance of more than 1/3 of a point   ( for both A and B )