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

What should Peter do? Suggest alternative courses of action, Peter has wor...

Peter has worked for five years as an assistant accountant for a large garage and vehicle repair workshop. In the past two weeks he has noticed that one of the managers, Simon, ha

Modern techniques economic order quantity, The economic demand quantity can...

The economic demand quantity can also be found out with the assist of a graph. In this technique ordering cost, carrying cost and total inventory costs as per various lot sizes are

Trust law and accounts, Trust There is no generally accepted definition...

Trust There is no generally accepted definition of a trust, although many have attempted. Underhill defines a trust as"an equitable obligation binding a person (who is called a

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

Journal entries to record transactions in the general fund, A village orde...

A village ordered supplies for its Fire Department at an estimated cost of $16,700. The supplies were received with an invoice for $16,800. The village accepted the shipment and th

Cash budget, What is a cash budget? How it is useful in managerial decision...

What is a cash budget? How it is useful in managerial decision making?

Financial reporting, what the meaning of the economic consequences of accou...

what the meaning of the economic consequences of accounting information quality with examples?

Financial Statement Analysis Group Project 2, Financial Statement Analysis ...

Financial Statement Analysis Group Project 2 ACCT3303 Spring 2013 Due Date: May 5 (by the end of the day) The specific purposes of this project are: 1. Apply to actual companies th

Calculate pv of cash flows, Q. Calculate PV of cash flows? Estimat...

Q. Calculate PV of cash flows? Estimated market value                                              $116·26 per $100 of debentures The value of 45 shares in 5 years' tim

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