Compounding or future value concept, Financial Management

Assignment Help:

Compounding or Future Value Concept: - Under this process of compounding the future worth of all cash inflows at the end of the time horizon at a particular rate of interest are found. Interest is compounded when the sum earned on an initial deposit becomes part of the principal at the end of the first compounding period.

Instance: - If Mr. A invests Rs 1000 in a bank which tender him 10% interest compounded annually he as Rs 1100 in his account at the end of the first year. The total of the interest as well as principal Rs 1100 constitutes the principal for the next year. He therefore earns Rs 1210 for the second year. This turns into the principal for the third year and so on.


Related Discussions:- Compounding or future value concept

Balance sheet and income statement, Do these two problems in Excel. Balance...

Do these two problems in Excel. Balance Sheet and Income Statement.  The following information is used for the first two problems.  Problem 1 is the income statement and problem 2

Optimal capital structure, (a) The calculation of the Weighted Average Cost...

(a) The calculation of the Weighted Average Cost of Capital (WACC) is theoretically easy but practically complex. Discuss. (b) Two-fifths of the total market value of Jefferson

What do you mean by collateralized mortgage obligation, Q. What do you mean...

Q. What do you mean by Collateralized Mortgage Obligation? Collateralized Mortgage Obligation (CMO) - SECURITY whose cash flows equal the difference between cash flows of colla

Compare diversifiable and nondiversifiable risk, Compare diversifiable and ...

Compare diversifiable and nondiversifiable risk. Which do you think is more important to financial managers in business firms? Diversifiable risk is able to be dealt with by of

Day count convention, Day count convention is a system used to determ...

Day count convention is a system used to determine the number of days between two coupon dates. It is important in calculating accrued interest and present value

Characteristics - nature of financial management, Characteristics - Nature ...

Characteristics - Nature of Financial Management: 1) Financial Planning and Control: Finance is a base for all the business activities. Business Activities should be not on

Securities, Calculate the expected rate of return and risk of return

Calculate the expected rate of return and risk of return

Hurdles in implementation of securitization, The following are considered t...

The following are considered the major stumbling blocks: The process becomes expensive because of the stamp duty payable. It also

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