Compound interest with nonannual periods

Assignment Help Financial Management
Reference no: EM131307876

(Compound interest with nonannual periods?)

a. Calculate the future sum of ?$4,000 ?, given that it will be held in the bank 8 years at an annual interest rate of 4 percent.

b. Recalculate part? (a) using compounding periods that are? (1) semiannual and? (2) bimonthly? (every two? months).

c. Recalculate parts? (a) and? (b) for a 8 percent annual interest rate. d. Recalculate part? (a) using a time horizon of 16 years? (annual interest rate is still 4 ?percent).

e. With respect to the effect of changes in the stated interest rate and holding periods on future sums in parts? (c) and? (d), what conclusions do you draw when you compare these figures with the answers found in parts? (a) and? (b)?

Reference no: EM131307876

Reviews

Write a Review

 

Financial Management Questions & Answers

  Identify the clients complex broking needs

Identify the clients complex broking needs - Develop complex broking options and developing and nurturing relationships with clients, other professionals and third party referrers

  Saved to supplement his pension and social security

Calculate the future value of $5,000 earning 10% after one year assuming annual compounding. Richard Gorman is 65 years old and about to retire. He has $500,000 saved to supplement his pension and Social Security, and would like to withdraw it in equ..

  Bond trader purchased each of the bonds

A bond trader purchased each of the following bonds at a yield to maturity of 6%. Immediately after she purchased the bonds, interest rates fell to 5%. What is the percentage change in the price of the following bond after the decline in interest rat..

  What is the pre tax cost of debt

Frost Inc. issued a 20-year, 8% semi-annual bond 5 years ago. The bond currently sells for 105% of its face value. The company’s tax rate is 40%. What is the pre tax cost of debt? What is the after-tax cost of debt?

  Previously issued A2 public utility bonds

A previously issued A2, 15-year industrial bond provides a return one-fourth higher than the prime interest rate of 11 percent. Previously issued A2 public utility bonds provide a yield of three-fourths of a percentage point higher than previously is..

  Make semiannual payments and are priced at par value

Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has five years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the perc..

  How much debt is displaced by this lease

High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. How much debt is ..

  Cost to organization brought about should legislation pass

Imagine you are a Compensation Manager at a large service organization. Roughly 700 of your employees are paid the MWR (Minimum Wage Rate), which is presently $7.25 per hour. The CEO recently came to the CFO (your boss) in a highly excited state. Cha..

  Interest rate compounded annually

Ryan Borrowed $15,000 now with a 7% interest rate compounded annually. He needs to pay them back over 7 years starting from the end of the first year, what will be Ryan’s annuity assuming that he will miss the 4th payment

  Equired rate of return on projects of this risk class

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the pro..

  Discuss the difference between cash flow and profit

List and describe the four major financial statements.

  Afn different from the one when the company pays dividends

Broussard Skateboard's sales are expected to increase by 20% from $7.8 million in 2015 to $9.36 million in 2016. Its assets totaled $4 million at the end of 2015. Baxter is already at full capacity, so its assets must grow at the same rate as project..

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