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Mary sought for advice from a friend, a manager of first bank who advised him to save 12,000 annually with first bank at the same interest rate for the same duration as union bank and have the present value of his savings a 44,914.30 it is however disclosed that the present value of the 6th year savings in access bank at the same rate is 26,667. You are required to compute Annual savings in union bank Duration of savings in union bank Annual interest rate?
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Mary sought for advice from a friend, a manager of first bank who advi...
Computation of Annual Savings, Duration of Savings, and Interest Rate


Annual Savings

To compute the annual savings, we need to use the present value formula. We know that the present value of Mary's savings in First Bank is 44,914.30 and she saves 12,000 annually. Therefore, the annual savings can be computed as follows:

PV = (PMT / r) x (1 - (1 + r)^-n)

where PV is the present value, PMT is the annual savings, r is the interest rate, and n is the number of years.

Substituting the values we know, we get:

44,914.30 = (12,000 / r) x (1 - (1 + r)^-n)

Using trial and error or a financial calculator, we can solve for r to get the annual interest rate.

Duration of Savings

Since Mary is saving the same amount with the same interest rate in both First Bank and Union Bank, we can assume that the duration of her savings in Union Bank is also 6 years. Therefore, the duration of savings in Union Bank is 6 years.

Annual Interest Rate

Using the present value formula and the given present value of Mary's savings in First Bank, we can solve for the annual interest rate. Once we know the interest rate, we can use it to compute the annual savings in Union Bank.

Therefore, the annual interest rate can be computed as follows:

PV = (PMT / r) x (1 - (1 + r)^-n)

44,914.30 = (12,000 / r) x (1 - (1 + r)^-6)

Using trial and error or a financial calculator, we can solve for r to get the annual interest rate. Once we know the interest rate, we can use it to compute the annual savings in Union Bank.
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Mary sought for advice from a friend, a manager of first bank who advised him to save 12,000 annually with first bank at the same interest rate for the same duration as union bank and have the present value of his savings a 44,914.30 it is however disclosed that the present value of the 6th year savings in access bank at the same rate is 26,667. You are required to compute Annual savings in union bank Duration of savings in union bank Annual interest rate?
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