00:01
This is a nominal interest problem, which means we need the nominal interest formula, which is given as a, which is the final payment, the money at the end of the period, is equal to the principle, which is the money we put at the beginning, of one minus the interest rate to the power of m divided by m, raised to the power of minus t times m.
00:26
M represents, let's find it.
00:29
M, it says that the discount is convertible every four years.
00:33
This means m is equal to 1 over 4.
00:37
And t is the timing years, which is given as two years.
00:41
The interest rate, r is given a 6%, but we don't write it as a percentage.
00:47
We write it as a decimal, so 0 .06.
00:51
And finally, the principle, which is the $100 we are giving.
00:57
So, a is equal to 100 times 1 minus 0 .06 to the power of 1 over 4 divided by 1 over 4, raised to the power of minus 2 times 1 over 4.
01:18
This is something we can put in the calculator.
01:22
Let's simplify it a little bit to get, let's see, 100, 1 minus...