ENGINEERING ECONOMICS under Compound Interest Dont't use excel. Just use formule to show the solution. If the sum of P12,000.00 is deposited in anaccount earning interest rate of 9%compounded quarterly,a.) what will it become after 1 year?b.) what is the effective rate?c.) What is then the equivalent nominalinterest rate if compounded monthly?

Future Value: The future value is the amount that will be received at the end of a certain period.…

Answered: If the sum of P12,000.00 is deposited…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 31P

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Similar questions

Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?

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If the sum of P12,000.00 is deposited in an account earning interest rate of 9% compounded quarterly, a.) what will it become after 1 year? b.) what is the effective rate? c.) What is then the equivalent nominal interest rate if compounded monthly?