Consider a dolar amount of $750 today, along with a nominal interest rate of 15.00%. You are interested in calculating the future value of this mount after 5 years. for all future value calculations, enter -$750 (with the negative sign) for PV and 0 for PMT. When calculating the future value of $750, compounded annually for 5 years, you would enter a value of 5 for N, a value of 15 for 1/Y. Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded annually for 5 at the given nominal nterest rate, yields a future value of approximately $1,500.52 When calculating the future value of $750, compounded semi-annually (twics per year) for 5 years, you would enter a value of 10 for value of 2.50% for L/Y. Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded semi-annually for 5 at the given ominal interest rate, yields a future value of $1,545.77 ▼ When calculating the future value of $750, compounded quarterly for 5 years, you would enter a value of 20 for N, a value of 3.75% for 1/ Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded quarterly for 5 at the given nominal nterest rate, yields a future value of $1,566.11 ▼ . When calculating the future value of $750, compounded monthly for 5 years, you would enter a value of for I/ for N, a value of
Consider a dolar amount of $750 today, along with a nominal interest rate of 15.00%. You are interested in calculating the future value of this mount after 5 years. for all future value calculations, enter -$750 (with the negative sign) for PV and 0 for PMT. When calculating the future value of $750, compounded annually for 5 years, you would enter a value of 5 for N, a value of 15 for 1/Y. Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded annually for 5 at the given nominal nterest rate, yields a future value of approximately $1,500.52 When calculating the future value of $750, compounded semi-annually (twics per year) for 5 years, you would enter a value of 10 for value of 2.50% for L/Y. Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded semi-annually for 5 at the given ominal interest rate, yields a future value of $1,545.77 ▼ When calculating the future value of $750, compounded quarterly for 5 years, you would enter a value of 20 for N, a value of 3.75% for 1/ Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded quarterly for 5 at the given nominal nterest rate, yields a future value of $1,566.11 ▼ . When calculating the future value of $750, compounded monthly for 5 years, you would enter a value of for I/ for N, a value of
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider a dollar amount of $750 today, along with a nominal interest rate of 15.00%. You are interested in calculating the future value of this
amount after 5 years.
For all future value calculations, enter -$750 (with the negative sign) for PV and 0 for PMT.
When calculating the future value of $750, compounded annually for 5 years, you would enter a value of
15 for 1/Y.
Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded annually for 5 at the given nominal
interest rate, yields a future value of approximately $1,508.52.
When calculating the future value of $750, compounded semi-annually (twice per year) for 5 years, you would enter a value of 10 for N,
a value of 7.50% for I/Y.
5 for N, a value of
Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded semi-annually for 5 at the given
nominal interest rate, yields a future value of $1,545.77.
When calculating the future value of $750, compounded quarterly for 5 years, you would enter a value of 20 for N, a value of
3.75% for 1/Y.
Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded quarterly for 5 at the given nominal
interest rate, yields a future value of $1,566.11 ▼
When calculating the future value of $750, compounded monthly for 5 years, you would enter a value of
L/Y.
for
Hint: Assume that there are 365 days in a year.
When calculating the future value of $750, compounded daily for 5 years, you would enter a value of
for L/Y.
for N, a value of
Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded monthly for 5 at the given nominal
interest rate, yields a future value of
for N, a value of
Using the keystrokes you just identified on your financial calculator, the future value of $750, compounded daily for 5 at the given nominal
interest rate, yields a future value of
Based on the results of your calculations, you can conclude that (all else equal) more frequent compounding leads to a
This is due to a
periodic interest for more frequent compounding.
future value.
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