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Concept introduction:
Present Value:
Present value of money means the present or current value of a future cash flow at a given rate of interest or return.
Future Value:
The future value is the value of present cash flow at specified time period and at specified
Requirement 1:
We have to determine the interest rate column and number of period row while estimating future value.
Answer to Problem 1QS
The interest rate column we will refer is 12% and year row will be of 2 years.
Explanation of Solution
Since the rate of interest is 12% annually and time period is 2 years. Therefore the interest rate column will be of 12% and time period row will be of 2 years.
Concept introduction:
Present Value:
Present value of money means the present or current value of a future cash flow at a given rate of interest or return.
Future Value:
The future value is the value of present cash flow at specified time period and at specified rate of return.
Requirement 2:
We have to determine the interest rate column and number of period row while estimating future value.
Answer to Problem 1QS
The interest rate column we will refer is 3% and year row will be of 4 years.
Explanation of Solution
Since the rate of interest is 6% annual rate, compounded semi annually and time period is 2 years. Therefore the interest rate column will be of 3% (6%/2) and time period row will be of 4(2*2) years.
Concept introduction:
Present Value:
Present value of money means the present or current value of a future cash flow at a given rate of interest or return.
Future Value:
The future value is the value of present cash flow at specified time period and at specified rate of return.
Requirement 3:
We have to determine the interest rate column and number of period row while estimating future value.
Answer to Problem 1QS
The interest rate column we will refer is 2% and year row will be of 8 years.
Explanation of Solution
Since the rate of interest is 8% annual rate, compounded quarterly and time period is 2 years. Therefore the interest rate column will be of 2% (8%/4) and time period row will be of 8(2*4) years.
Concept introduction:
Present Value:
Present value of money means the present or current value of a future cash flow at a given rate of interest or return.
Future Value:
The future value is the value of present cash flow at specified time period and at specified rate of return.
Requirement 4:
We have to determine the interest rate column and number of period row while estimating future value.
Answer to Problem 1QS
The interest rate column we will refer is 1% and year row is not shown in table B.2
Explanation of Solution
Since the rate of interest is 12% annual rate, compounded monthly and time period is 2 years. Therefore the interest rate column will be of 1% (12%/12) and time period row will be of 24(2*12) years but it is not shown in table B.2
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Chapter B Solutions
Managerial Accounting (Looseleaf)
- 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?arrow_forwardFor each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table: Annual Rate Number of Years Invested Compounded (a) Rate of Interest (b) Number of Periods a. 11% 10 Annually enter percentages % enter the number of periods b. 8% 8 Quarterly enter percentages % enter the number of periods c. 10% 19 Semiannually enter percentages % enter the number of periods 2. In a present value of an annuity of 1 table: (Round answers to 1 decimal place, e.g. 458,58.1.) Annual Rate Number of Years Invested Number of Rents Involved Frequency of Rents (a) Rate of Interest (b) Number of Periods a. 12% 30 30 Annually enter percentages % enter the number of periods b. 11% 16 32 Semiannually enter percentages % enter the number…arrow_forwardFind the interest rates in the situation as: The effective annual interest rate is 11.02% and compounding is monthly. Find the nominal interest rate.arrow_forward
- For each of the following cases, indicate (a) to what interest rate columns and (b) what number of periods you would refer to in looking up the future value factor. (1) In Table 1 (future value of 1): \table||,Annual Rate, \table[[Number of], [Years Invested]], Compounded], [Case A,5%,5, Annually], [Case 8,8%, 4, Semiannually]]\ table[(a)..(b)], [Case A,%, periods,], [Case B,%, periods,,]] (2) In Table 2 (future value of an annuity of 1): \ table[],Annual Rate,\table[[Number of], [Years Invested]], Compounded], [Case A,4%, 12, Annually), (Case B,6%, 5,Semiannually]] \table[[,(a), (b)].[..%,periods], [Case A,%, periods,]]arrow_forwardCalculate interest using a 360-day year. If required, round your answers to the nearest cent. Principal Interest Rate Time Interest $2,700 9.6% 30 days $? 3,000 8.0% 45 days $? 3,300 6.0% 80 days $? 3,800 10.5% 120 days $? 5,300 12.0% 150 days $?arrow_forwardFor each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table: Annual Rate Number of Years Invested Compounded (a) Rate of Interest (b) Number of Periods a. 11% 10 Annually % b. 8% 8 Quarterly % c. 10% 19 Semiannually % 2. In a present value of an annuity of 1 table: (Round answers to 1 decimal place, e.g. 458,58.1.) Annual Rate Number of Years Invested Number of Rents Involved Frequency of Rents (a) Rate of Interest (b) Number of Periods a. 12% 30 30 Annually % b. 11% 16 32 Semiannually % c. 12% 8 32 Quarterly %arrow_forward
- For each of the following cases, indicate (a) to what interest rate columns and (b) to what number of periods you would refer in looking up the future value factor. (Round percentages to 2 decimal places, e.g. 5,275.)(1) In Table 1 (future value of 1): Annual Rate Number ofYears Invested Compounded Case A 4% 3 Annually Case B 9% 5 Semiannually (a) (b) Case A % periods Case B % periods (2) In Table 2 (future value of an annuity of 1): Annual Rate Number ofYears Invested Compounded Case A 6% 5 Annually Case B 12% 6 Semiannually (a) (b) Case A % periods Case B % periodsarrow_forward(Computation of Future Values and Present Values) Using the appropriate interest table, answer the following questions. (Each case is independent of the others.) What is the future value of 20 periodic payments of $4,000 each made at the beginning of each period and compounded at 8%? What is the present value of $2,500 to be received at the beginning of each of 30 periods, discounted at 5% compound interest? What is the future value of 15 deposits of $2,000 each made at the beginning of each period and compounded at 10%? (Future value as of the end of the fifteenth period.) What is the present value of six receipts of $1,000 each received at the beginning of each period, discounted at 9% compounded interest?arrow_forward
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