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

What is cs optimal decision, Copper Suppliers, Inc. (CS), is a distributor ...

Copper Suppliers, Inc. (CS), is a distributor of commercial grade copper. CS purchases copper directly from copper mines and then after refining it, sells the refined copper to in

Which depreciation method would produce the higher npv, Wendy is evaluating...

Wendy is evaluating a capital budgeting project that should last for 4 years. The project requires $ 800,000 of equipment. She is unsure what depreciation method to use in her anal

Total amount capitalized for the patent account, Gomez incurred $350,000 of...

Gomez incurred $350,000 of research and development costs to develop a product for which a patent was granted on January 2, 2008. Legal fees and other costs associated with the reg

What is the net present value of this machine, A company is considering the...

A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful l

Intangibles, #question.how to account enginering cost

#question.how to account enginering cost

Financial leverage - ratio analysis, Provide a brief (one typed page) discu...

Provide a brief (one typed page) discussion of analysis of the ratios of your company versus the competitor and the industry, addressing your company's liquidity, solvency, profita

Financial ratio analysis, Financial ratio analysis Financial rati...

Financial ratio analysis Financial ratio analysis is a statistical tool that measures the relationship between two financial figures. It invol

Financial statements, Describe the following questions:- Q.1 Explain how...

Describe the following questions:- Q.1 Explain how financial statements assist in the capital allocation process. How are financial statements limited? Which financial statement

Measure of return in percentage terms, Both IRR and ROCE tenders a relative...

Both IRR and ROCE tenders a relative measure of return in percentage terms a feature that is seen as attractive to managers who may perhaps have difficulty in interpreting the abso

Explain the term - providing a service, Explain the term - Providing a serv...

Explain the term - Providing a service One way of viewing accounting is as a form of service. Accountants provide economic information to their 'clients', who are numerous user

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