Calculate effective annual interest rate, Corporate Finance

Two years ago, Homeless People Ltd needed to accumulate a total of $600,000 by the end of four years to acquire new facility to house the homeless people in the city.  To do so, Homeless People Ltd makes equal semi-annual deposits into a fund which earns 8% per annum, interest compounded semi-annually.  To date, the organization has made four equal semi-annual deposits into the fund.  Unfortunately, the price of the facility has gone up so much, now the organization requires to accumulate a total of $1,000,000 in two years' time.  However, the organization can from now on earn 10% per annum, interest compounded semi-annually.  All monies accumulated to date will from now on earn a return of 10% per annum, interest compounded semi-annually.

a) What is the increased equal semi-annual deposit that Homeless People Ltd will need to make so that the fund will contain $1,000,000 in two years' time? 

b) What is the effective annual interest rate for the "two years' time" stated in part (a)?

c) Why does money have a Time Value?

Posted Date: 2/14/2013 6:23:01 AM | Location : United States







Related Discussions:- Calculate effective annual interest rate, Assignment Help, Ask Question on Calculate effective annual interest rate, Get Answer, Expert's Help, Calculate effective annual interest rate Discussions

Write discussion on Calculate effective annual interest rate
Your posts are moderated
Related Questions
what is the agency relationship between shareholders and auditore


From a Corporate Finance and Governance perspective, the assignment is about answering three fundamental questions: 1. How much value does the organisation create/destroy today?

What are the advantages and disadvantages of the alternative dividend policies of the three companies? Discuss the circumstances under which each managing director might be correct

I need help in Logit using Stata I am very new in that and my supervisor wants me to use panel data ... which model is best for me and why? no idea could you help me...

Summarize the key statistics for the stock and the industry (choose 8 items you believe informative, such as P/E ratio, market capitalization, dividend yield, ROE, sales etc.tion..

You are required to provide a report of approx 500 words or less (excluding attachments and references), accompanied by relevant calculations, in MS Word, MS Excel and/or PDF forma

Theoretically Modigliani and Miller (1958) took a fairly straightforward view of the purpose of a company in an economy. They pointed out that companies take cash from providers o

the departure from Modigliani-Miller proposition using the agency cost and information asymmetry theory of capital structure

Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and management