Answer:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
a.
16843.93=12800*(1+r/100)^7
(16843.93/12800)^(1/7)=(1+r/100)
(1+r/100)=1.04
r=1.04-1
=4%
b.
50618.88=45,000*(1.04)^n
(50618.88/45,000)=(1.04)^n
Taking log on both sides;
log (50618.88/45,000)=n*log 1.04
n=log (50618.88/45,000)/log 1.04
=3 years
c.
1.A=$50*(1.05)^5
=$63.81(Approx).
A=$25*(1.1)^5
=$40.26(Approx).
2.
A=$25*(1.1)^5
=$40.26(Approx).
A=$50*(1.05)^5
=$63.81(Approx).
Hence Case 1 is correct.
Explanation:
Answer:
Rate of return.
Explanation:
Rate of return can be defined as the percentage of interest or dividends earned on money that is invested.
In Financial accounting, a return refers to the amount of profit generated by an investor on an investment over a specific period of time.
Basically, the rate of return which is typically expressed as a percentage of the initial costs of an investment can either be a gain or a loss on an investment. Therefore, a positive rate of return on an investment over a specific period of time, simply means that an investor is making a profit (gains) while a negative rate of return on an investment over a specific period of time, indicates that the investor is running at a loss.
Hence, the rate of return is used as a long-term decision-making tool to determine whether or not an investment is worth it.
Answer:
D. $4,100 dividend and a $6,900 tax free return of capital
Explanation:
Compound interest: FV = PV / (1+I)^N
Simple interest: FV = PV + (PV x I x N)
a. True
b. False
a. True
Explanation:
Compound interest
FV = PV / (1+I)^N
Simple interest
FV = PV + (PV x I x N)
All other variables held constant, investments paying simple interest have to pay significantly higher interest rates to earn the same amount of interest as an account earning compound interest.
a. True
All other factors being equal, both the simple interest and the compound interest methods will not generate the amount of earned interest by the end of the first year.
b. False
After the end of the second year and all other factors remaining equal, a future value based on compound interest will exceed a future value based on simple interest.
a. True
