Effective annual rate, Financial Management

Assignment Help:

You are interested in saving money for your first house. Your plan is to make regular deposits into brokerage account which will earn 14%. Your first deposit of $5,000 will be made today. You also plan to make four additional deposits at the beginning of each of the next four years. Your plan is to increase your deposits by 10% a year. (That is, you plan to deposit $5,500 at t = 1, and $6,050 at t = 2, etc.) How much money will be in your account after 5 years?

Effective Annual Rate (EFF%) = (1.14 / 1.10) - 1

                                               = 1.03636 - 1

                                               = .03636 = 3.63%

With a financial calculator, enter the following:

N = 5 years,   I/ Y = 3.63%,   PV = 0,   PMT = - $5,000,   CPT FV = $26,882.08

 


Related Discussions:- Effective annual rate

Does high operating leverage always mean high business risk, Does high oper...

Does high operating leverage always mean high business risk?  Explain. High operating leverage doesn't always mean high business risk.  If the company's sales are quite steady

Bonds Valuation, Six years ago . the singleton company sold a 20 year bond ...

Six years ago . the singleton company sold a 20 year bond with a 14% annual coupon rate and a 9% call premium. today, singleton called the bonds. the bonds originally were sold at

Explain about pink book, Q. Explain about pink book? This shows the var...

Q. Explain about pink book? This shows the various sub heads under which the lum sum amount sanctioned by allotment is to be spent and this indicates the works for which the al

Explain the average rate of return method, Q. Explain the Average Rate of r...

Q. Explain the Average Rate of return Method? Average Rate of return Method (ARR): This method is as well known as Accounting Rate of Return Method. It is on the basis of accou

Explain dual currency bond, Explain Dual Currency Bond A dual currency ...

Explain Dual Currency Bond A dual currency bond is a straight fixed-rate bond that is issued in one currency and pays coupon interest in that similar currency.  At maturity, th

Objectives and functions of asic, Objectives and Functions of ASIC The ...

Objectives and Functions of ASIC The objective of ASIC is to ensure the confident and informed participation of consumers in the financial system. To attain this objective, it

Evolution of securitization, Securitization is a financial innovati...

Securitization is a financial innovation born out of the necessity the savings and loan associations of the United States of America face to save themselves from im

Determine the working capital cycle, Working capital cycle (operating/tradi...

Working capital cycle (operating/trading/cash cycle) It is the time between paying for goods supplied and final receipt of cash from their sale. It is desirable to keep cycle a

Downgrade risk, Market participants' measure the default risk of an i...

Market participants' measure the default risk of an issue on the basis of the credit ratings that the credit rating agencies assign to the issues. Once rating is

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