Describe concept of future value and present value

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Reference no: EM132634

Question

(a) Describe concept of future value and present value.

(b) Natasha has graduated from high school and has received an award for Rs 5,000. She would deposit money in an interest earning account until she graduates from college. In her investigate for highest interest earning account; she has narrowed the listing down to following two accounts-

(i) Bank A pays 9 percent interest compounded annually,
(ii) Bank B pays 8 percent interest compounded semi-annually.

Which is better offer, and how much will Natasha have upon graduation from college?

(c) The Mauritian Football Association would like to accumulate Rs 10,000 by end of 4 years from now to economics a big football weekend for its members. The Association currently has Rs 2,500 and wishes to raise balance by arranging annual fund-raising events. How much money have to they rise at each annual fund-raising event assuming 8 percent rate of interest?

(d) The Medical Equipment Company paid Rs 2.25 general stock dividend last year. The company's policy is to agree to its dividend to grow at 5 percent per year indefinitely. What is value of the stock if the required rate of return is 8 percent?

(e) Kingston Kitchen Stuff has in recent times sold 1,000 shares of Rs 6.75 preferred stock. What is value of the stock assuming 10 percent necessary rate of return?

Reference no: EM132634

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