Compute the future value - shorter compounding period, Financial Accounting

Assignment Help:

Compute the future value of Rs.5000 at the end of 6 years, whether nominal interest rate is 12 percent and the interest is allocated (payable) quarterly at frequency = 4

Solution:

 FVn  = PV (1 + k/m )m*n

FV6 = 5000(1 + .12/4)6*4

= 50000 (1 + .03)24

= 5000 * 2.0328

= 10,164

After 6 years the future value of Rs.5000 on the origin of quarterly compounding would be as Rs.10 164 whereas in condition of semi-annual and yearly compounding the future value would be as

FV6 = 5000(1 + .12/2)6*2

= 50000 (1 + .06)12

= 5000 * 2.0122

= 10,061

FV6 = 5000(1 + .12)6

= 5000(1.9738)

=  9868

This dissimilarity in future value is because of the fact that interest on interest has been computed.


Related Discussions:- Compute the future value - shorter compounding period

Relevant cash flows , The City of Miami must replace a number of its concre...

The City of Miami must replace a number of its concrete mixer trucks with new trucks. It has received two bids and has evaluated closely the performance characteristics of the seve

Management and operational control, Management and operational control: Co...

Management and operational control: Cost of goods sold and gross margin analysis, profit as net income analysis, operating expense analysis, contribution analysis and analysis of

#1, #1. Quarter Corporation had the following transactions during the quart...

#1. Quarter Corporation had the following transactions during the quarter ended June 30, 2010: Loss from tsunami damage (extraordinary) $985,000 Payment of fire insurance premium f

What is the average rate of return on investment, a company is evaluating a...

a company is evaluating a project requiring capital expenditure of 620,000. estimated life of project is four years and no salvage value. estimated net income and net cash flow fro

Steps required to do the arbitrage. , John Chan considers buying a six-mont...

John Chan considers buying a six-month stock futures contract on the shares of Li & Fung Limited. Shares of Li & Fung Limited are now trading at $50 per share and it is expected th

Explain zero base budget, Q. Explain Zero Base Budget? Zero base budget...

Q. Explain Zero Base Budget? Zero base budgeting can be defined as - 1) An operating planning and budgeting process which requires each manager to justify his entire budget

Vegetable gowing, disscuss the applicability of a operating cycle in vegeta...

disscuss the applicability of a operating cycle in vegetable growing bussiness in uganda

Amalgamation of partnership, Please I need assistance with steps to prepare...

Please I need assistance with steps to prepare amalgamation

Determine the net present value for the project, An investment project requ...

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital

Calculate the pv and npv, Question 1 Suppose you take out a loan of $10...

Question 1 Suppose you take out a loan of $10,000, repayable by five equal annual instalments. The interest rate is 10% per year. (a) How much do you need to repay per year

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd