Answered: 1. What is the difference between the…

1. What is the difference between the compound interests on ₱5000 for 1 year at 4% per annum compounded annually and semi-annually?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 2STP

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Concept explainers

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.

Question

1. What is the difference between the compound interests on ₱5000 for 1 year at 4% per annum compounded annually and semi-annually?

2. What sum of money must be deposited at the end of every three months into an account paying 3.7% compounded quarterly to accumulate to ₱18,000.00 in twelve years?

3. A sum of ₱12,500 amounts to ₱15,500 in 4 years at the rate of simple interest. What is the rate of interest?

4. What is the future value of an annuity with monthly deposits of ₱175 for 11 years at an interest rate of 7.32% compounded monthly? Deposits are made at the end of the month.

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