Effective annual rate, Financial Management

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

 

Posted Date: 2/22/2013 4:49:21 AM | Location : United States







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

Write discussion on Effective annual rate
Your posts are moderated
Related Questions
If firm A has a higher debt-to-equity ratio than firm B then that means what

Modern / Discounting Cash Flow Techniques : These methods generally are of more use to businesses in their investment decisions. They take into account the time value of money and

Solutions to this Conflict In common, to make sure that managers act to the best interest of shareholders, the firm will: (a) Acquire Agency Costs in the form of:

Evaluation: Once all the possible events are identified, the next step in the risk management process is to evaluate the events. As stated previously, the evaluation process wo

What is Performance ratios ROCE Return oncapital employed (ROCE)= (Profit before interest and tax (PBIT) / Capital employed) * 100% ROCE measures profitability and illu

V aluation Models A valuation model defines the exercise of applying financial and economic principles to estimate the value of an asset. Discounted cash flow valuation mod

Q. Evaluate Earning Yield plus Growth in Earning Method? Earning Yield plus Growth in Earning Method: - If the EPS of a company is likely to grow at a constant rate of growth t


Q. Show Maximum opportunity cost? If Marton hedges all its awaited dollar income over the next year at US$1.55: £l this will make guaranteed (ignoring other sources of risk) st

What is Control risk That material misstatement could take place and not be detected, or prevented on a timely basis, by accounting and internal control systems. All audits