Determine out the future value, Financial Accounting

Assignment Help:

Determine out the future value of Rs.1000 compounded yearly for 10 years at an interest rate of 10 percent.

Solution: The future value 10 years thus would be

FV = PV (1+k)n

FV = 1,000 (1+.10)10

= 1000 . (1.10)10

= 1000 (2.5937)

= 2593.7

The appreciation in current value of an amount can also be shown in terms of return. So the return is the income on investment over every period divided via the amount of investment in the starting of the period.  By the above illustration the arithmetic average return would be (2593.7 -1000)/1000=159.37percent over the ten year period or 15.937 percent per year.  The major problem of using arithmetic average is which it avoids the process of compounding.  For overcome this, the accurate method is to use geometric average return to compute overage annual return.

Rearranging the equation 1 we find out that:

 k = n ((√((FV)/(PV))) - 1)  ................................Eq(2)

By using the values of Eq. 1

= 10 (√(2593.7/1,000) ) - 1

= ((2593.7/1,000)1/10) - 1

= 1.10 - 1

= .10

= 10 %


Related Discussions:- Determine out the future value

The trustee in bankruptcy, THE TRUSTEE IN BANKRUPTCY 1) Appointment o...

THE TRUSTEE IN BANKRUPTCY 1) Appointment of trustee The trustee is appointed: By the creditors by ordinary resolution, or By the committee of inspection, if so

Property in bankrupt''s reputed ownership, PROPERTY IN BANKRUPT'S REPUTED O...

PROPERTY IN BANKRUPT'S REPUTED OWNERSHIP The trustee may claim property owned by third parties which is in the bankrupt's possession at the commencement of the bankruptcy if:

Illustrate the new rules of sec, New Rules SEC i) Effective for years a...

New Rules SEC i) Effective for years after December 15, 2006 ii) New Disclosures mandated (1) Fair value of options on grant date (2) Value of grant per 123R (3) Cl

Principles of banking and finance, Q. Principles of banking and finance? ...

Q. Principles of banking and finance? An introduction to the principles of banking and finance. It covers a broad variety of topics using an economic perspective and aims to gi

Balance sheet, 1. Consider the following balance sheet: Bes...

1. Consider the following balance sheet: Best Care HMO                  Balance Sheet               June 30, 2007 Assets  / Current Assets*

Prepare the income statement and balance sheet, Below is the Trial Balance ...

Below is the Trial Balance for Clay Employment Services, year ending December 31, 2011.  Previous period's information were as follows: net receivables, $290,000 and inventory, $82

Show the goals of managers, Q. Show the goals of managers? The goals of...

Q. Show the goals of managers? The goals of managers may conflict with the objectives of shareholders particularly with the objective of maximisation of shareholder wealth. Man

Determine the amount and character of the recognized gain, On May 2, 1986, ...

On May 2, 1986, Hannah acquired residential real estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On January 20, 2013, the buildin

Trustees right to be indemnified-trusts laws and accounts, Trustees right t...

Trustees right to be indemnified Trustees have, however, a right to be indemnified: 1. Out of trust property, for all expenses properly incurred in the execution of the tru

Protective Trusts-secret trusts-trusts laws and accounts, PROTECTIVE TRUSTS...

PROTECTIVE TRUSTS The income of property may be settled on such terms as to restrict its availability to creditors of the beneficiary in the following ways: (a) Determinable

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