I. Bank X pays 12 per cent and compounds interest quarterly. If Rs 200,000 is deposited initially, how much shall it grow at the end of 6 years? Find effective annual rate (EAR)
I. Bank X pays 12 per cent and compounds interest quarterly. If Rs 200,000 is deposited initially, how much shall it grow at the end of 6 years? Find effective annual rate (EAR)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA3: Time Value Of Money
Section: Chapter Questions
Problem 13E
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Transcribed Image Text:Question 02
I. Bank X pays 12 per cent and compounds interest quarterly. If Rs 200,000 is deposited
initially, how much shall it grow at the end of 6 years? Find effective annual rate (EAR)
II. We can make an immediate payment now of Rs 130,000 or pay equal amount of A for
the next five years , first payment being payable after 1 year.
1) with a time value of money of 12 per cent , what the maximum value of A we would
be willing to accept?
2) What maximum value of A we would be willing to accept if the payments are made
in the beginning of the year?
III. You buy a house for Rs50 lakh and immediately make cash payment of Rs 10 lakh. You
finance the balance amount at 12 percent for 20 years with equal annual installments.
How much are the annual installments? How much of the each payment goes towards
reducing the principal?
IV. An account earning 6.6% interest compounded continuously for 10 years would have a
balance of how much if the principal was Rs 5500.
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