1. Assume that 1500 Php is deposited in an account in which interest is compounded annually at a rate of 6% Find the accumulated amount after 5 years. 2. Assume that 1500 Php is deposited in an account in which interest is compounded annually for 5 years. Find the accumulated amount, if the interest rate is 8 ½ %.

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Q: What is the effective rate of interest

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A:

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.