Concept explainers
a)
To compute: The
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
b)
To compute: The future value of the investment when compounded semi-annually.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
c)
To compute: The future value of the investment when compounded monthly.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
d)
To compute: The future value of the investment when compounded continuously.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
e)
To discuss: The increase in value with the increase in compounding.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
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CORPORATE FINANCE- ACCESS >C<
- Saved. For an investment to triple in value during a 25-year period. a. What annually compounded rate of return must it eam? (Do not round Intermedlate calculations and round your final answer to 2 decimal places.) Annually compounded rate of return b. What quarterly compounded rate of return must it earn? (Do not round Intermedlate calculatlons and round your final onswer to 2 declmal places.) Quarterly compounded rate of return c. What monthly compounded rate of return must it earn? (Do not round Intermedlate calculatlons and round your final answer to 2 decimal places.) Monthly compounded rate of return Next > < Prev 15 of 23 connect PI T 5 N.arrow_forwardAt what rate of interest, compounded quarterly, will an investment double itself in * ?5 years 17.69% O 6.75% O 3.53% O 11.52% O 13.58% Oarrow_forwardWhat are the future value and the interest earned if $2800 is invested for 3 years at 8% compounded quarterly? (Round your answers to the nearest cent.) future value $ interest earned $arrow_forward
- Find the accumulated value of an investment of $15,000 for 4 years at an interest rate of 4.5% if the money is a. compounded semiannually; b. compounded quarterly; c. compounded monthly d. compounded continuously. Round answers to the nearest cent. a. What is the accumulated value if the money is compounded semiannually?arrow_forwardWhat is the future value of $100 invested in an account for eight years that earns 10% annual interest, compounded semiannually (rounded to the nearest whole dollar)? a. $214.b. $216.c. $218.d. $220.arrow_forwardWhat rate of interest compounded annually is the same as the rate of interest of 8% compounded quarterly? A. 8.07 % B. 8.12 % C. 8.16 % D. 8.24 0/ If an initial investment of $1,000 is invested at 8% interest per year with quarterly compounding, how much would be in the account after five years? A. $1,081.60 B. $1,061.66 C. $1,082.43 D. $1,281.60arrow_forward
- COMPOUND INTEREST 1. If the sum of P12,000.00 is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? 2. In the previous problem, what is the effective rate? 3. What is the equivalent nominal interest rate if compounded monthly? 4. How many years are required for P1,000.00 to increase to P2,000.00 if invested at 9% per year compounded continuously?arrow_forwardCOMPOUND INTEREST 1. If the sum of P12,000.00 is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? 2. In the previous problem, what is the effective rate? 3. What is the equivalent nominal interest rate if compounded monthly? 4. How many years are required for P1,000.00 to increase to P2,000.00 if invested at 9% per year compounded continuously? 5. What payment X ten years from now is equivalent to a payment of P1,000.00 six years from now, if interest is 15% compounded monthly? 6. An investment of P3,000,000.00 earns interest of 9% compounded continuously. What is the effective rate of interest? 7. What rate in percent compounded monthly is equivalent to 18% compounded semi- annually? 8. When compounded bi-monthly, P150,000.00 becomes P223,183.00 after 5 years. What is the nominal rate of interest?arrow_forwardAn investment is represented by the equation A(t)=10,250(1+ 0.04/12)120 How many years has the account been accumulating interest?arrow_forward
- What is the future value of initial deposit of $2000 with annual rate of 10%, compounded semi- annually over 8 years? a. $2450.0 b. $4365.8 O c. $4201.6 d. $2540.2arrow_forwardPresent Value of Amounts Due Assume that you are going to receive $730,000 in 10 years. The current market rate of interest is 4.5%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $730,000 to be received in the future? The present value is less due to the compounding of interest V over the 10 years.arrow_forwardPresent Value of Amounts Due Assume that you are going to receive $440,000 in 10 years. The current market rate of interest is 11%, compounded annually. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $440,000 to be received in the future? The present value is less due to the compounding of interest inflation the compounding of interest deflation over the 10 years.arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning