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

Bond, Bond - One type of long-term PROMISSORY NOTE, often issued to the pub...

Bond - One type of long-term PROMISSORY NOTE, often issued to the public as a SECURITY regulated under federal securities laws or state BLUE SKY LAWS. Bonds can eitherbe registered

Operating economics, Q Operating economics A number of operating econo...

Q Operating economics A number of operating economies will be available with the merger of two or more companies. Duplicating facilities in accounting purchasing marketing etc

Explain the term dividend cover, Dividend cover Dividend cover measure...

Dividend cover Dividend cover measures the relationship among earnings per share and net dividends per share. The higher the altitude of dividends for any given level of EPS t

Future value, you just started your first job, and you want to buy a house ...

you just started your first job, and you want to buy a house within 3 years. you are currently saving for the down payment. you plan to save $5,000 the first year. You also anticip

Cost of retained earning, Cost of Retained Earning: - It is on occasion arg...

Cost of Retained Earning: - It is on occasion argued that retained earnings carry no cost since a firm isn't required to pay dividend on retained earnings. Nevertheless this isn't

Drawbacks or criticism of mm approach, Q. Drawbacks or Criticism of MM Appr...

Q. Drawbacks or Criticism of MM Approach? Risk Perceptions of personal as well as corporate leverages are different: - It is incorrect to presume that 'personal leverage' is a

Define the implications of the interest rate parity, Discuss the implicatio...

Discuss the implications of the interest rate parity for the exchange rate determination. Answer: Presume that the forward exchange rate is roughly an unbiased predictor of the

#itle.., Hi'' can you tel me a how you describe what is a company las or an...

Hi'' can you tel me a how you describe what is a company las or an example. Thanks iulia

Determine the change in profit, (a) The BEQ is 200 customers per month, i.e...

(a) The BEQ is 200 customers per month, i.e. $3,000 / ($20 - $5) (b) The margin of safety is 300 customers, i.e. 500 - 200 (c) Graph (d) New break-even is 334 customers, i

Accounting standards, Accounting Standards The paradigm shift in the e...

Accounting Standards The paradigm shift in the economic environment during last few years has led to increasing attention being devoted to accounting standards as a means towa

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