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

Explain the sharpe performance measure, Explain the concept of the Sharpe p...

Explain the concept of the Sharpe performance measure. Answer:  The Sharpe performance measure abbreviated as SHP is a risk-adjusted performance measure. It is denoted as the mea

Define the tactics of shareholders used after the bid, After the bid Ta...

After the bid Tactics can be undertaken by directors to ensure that their shareholders don't accept the bid, if that is what they desire. Reject Share

Risks associated with investing in bonds, Interest rate risk is the risk wh...

Interest rate risk is the risk wherein the investor in bonds faces the risk of a fall in his bond price as and when there is a rise in the market interest r

Issuance calendar, Issuance Calendar Issuance calendar gives clear and ...

Issuance Calendar Issuance calendar gives clear and timely information about the borrowing program of the government. It clearly conveys the maturity profile of outstanding sto

Laspeyres method, Laspeyres Method Laspeyres method uses the quantities...

Laspeyres Method Laspeyres method uses the quantities consumed during the base period in computing the index number. This method is also the most commonly used method which inc

Securities and exchange commission (sec), SEC is the Regulatory body for...

SEC is the Regulatory body for investor protection in the United States which is created through the Securities Exchange Act of 1934.

Cost control strategies in organisations, 1. List the common elements of a ...

1. List the common elements of a submission for a major resource acquisition (purchase) 2. What is the difference between: A fixed asset and current asset? 3. If you worked i

Criticize the flexible exchange rate regime, Criticism from the viewpoint o...

Criticism from the viewpoint of the proponents of the flexible exchange rate regime. Economic agents can hedge exchange risk through forward contracts and other methods. They do

What is the rationale of the double-play strategy, Q. What is the rationale...

Q. What is the rationale of the double-play strategy? The hedge funds deploy a double-play strategy in order to engineer steep increases in interest rates and steep declines in

Premium, The amount by which the market price exceeds the conversion ...

The amount by which the market price exceeds the conversion value or the investment value called the premium. When expressed as a percentage, it is given by,

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