Determine out the future value, Financial Accounting

Assignment Help:

Determine out the future value of Rs.1000 compounded yearly for 10 years at an interest rate of 10 percent.

Solution: The future value 10 years thus would be

FV = PV (1+k)n

FV = 1,000 (1+.10)10

= 1000 . (1.10)10

= 1000 (2.5937)

= 2593.7

The appreciation in current value of an amount can also be shown in terms of return. So the return is the income on investment over every period divided via the amount of investment in the starting of the period.  By the above illustration the arithmetic average return would be (2593.7 -1000)/1000=159.37percent over the ten year period or 15.937 percent per year.  The major problem of using arithmetic average is which it avoids the process of compounding.  For overcome this, the accurate method is to use geometric average return to compute overage annual return.

Rearranging the equation 1 we find out that:

 k = n ((√((FV)/(PV))) - 1)  ................................Eq(2)

By using the values of Eq. 1

= 10 (√(2593.7/1,000) ) - 1

= ((2593.7/1,000)1/10) - 1

= 1.10 - 1

= .10

= 10 %


Related Discussions:- Determine out the future value

The principle of revenue, The principle that (1) requires revenue to be re...

The principle that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash and (3

Differences between estates and trusts-executorship laws, Differences betwe...

Differences between estates and trusts Note particularly the following differences between estates and trusts:— 1. Estate: on the death of a testator or an intestate, all

Explain why the operating cycle, The Operating Cycle Two Wheeler Cycle Shop...

The Operating Cycle Two Wheeler Cycle Shop buys all of its bikes from one manufacturer, Baxter Bikes. On average, bikes are on hand for 45 days before Two Wheeler sells them. The c

Draw budget constraint for cooking oil and flour, 1. You can buy any quanti...

1. You can buy any quantity of cooking oil at $5 per litre and any quantity of flour at $2 per kilo. You have allocated $20 to spend on cooking oil and flour.    (a) If you choo

Incremental cash flows, You are an analyst in the corporate finance departm...

You are an analyst in the corporate finance department of Pet Products, Inc. You have been asked to analyze a potential new product to be introduced. The beef-flavored water will b

Illustration of retirement of a partner, Illustration of Retirement of a pa...

Illustration of Retirement of a partner A, B and C have been trading as equal partners having capital contributions of £500,000 and £400,000 and £300,000 respectively as at 1st

Kannan, ACC2200 Financial Accounting Assignment Trimester 2, 2013 DUE DATE...

ACC2200 Financial Accounting Assignment Trimester 2, 2013 DUE DATE: Monday, 9th September 2013 VALUE: 15% of OVERALL ASSESSMENT REQUIRED: (1) This research question consists of a

Information systems implementation on company, 1. Will implementing SAP R/3...

1. Will implementing SAP R/3 across the entire PCD division provide the division with a competitive advantage?  Justify your answer carefully. 2. The Raleigh team promised IBM c

Content of accounts-trusts accounts, Content of accounts Periodical acc...

Content of accounts Periodical accounts should normally consist of:         1.    Balance sheet of the whole trust;         2.    Capital account;         3.    Income account

Npv cash flow model, As discussed earlier, the base case public sector comp...

As discussed earlier, the base case public sector comparator (PSC) will be a benchmark for different project bidding proposals when choosing the preferred bidder to provide the bes

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