Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 4, Problem 4.1C
If you invest $500 for one year at a rate of 8 percent per year, how much interest will you earn?
Expert Solution & Answer
Summary Introduction
To calculate: The interest earned.
Introduction:
The future value of money refers to the amount of dollars that an investment grows over a definite period at a particular rate of interest rate. In other words, it refers to the future value of present cash investments.
Answer to Problem 4.1C
The interest earned on $500 is $40.
Explanation of Solution
Given information:
Person X invests $500 for one year. The rate of interest is 8 percent.
The formula to calculate the future value:
Where,
“FV” refers to the future value or the current market value
“PV” refers to the present value
“r” refers to the simple rate of interest
“t” refers to the number of years or periods of investment
Compute the future value of investment:
Hence, the value of deposit after one year is $540.
Compute the interest earned:
The difference between the future value and the present value is the interest earned on the investment. The deposit value is $500. After one year, Person X receives $540. Hence, the interest received on the deposit is $40
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Chapter 4 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 4.1 - Prob. 4.1ACQCh. 4.1 - Prob. 4.1BCQCh. 4.1 - In general, what is the future value of 1 invested...Ch. 4.2 - What do we mean by the present value of an...Ch. 4.2 - Prob. 4.2BCQCh. 4.2 - Prob. 4.2CCQCh. 4.2 - Prob. 4.2DCQCh. 4.3 - What is the basic present value equation?Ch. 4.3 - Prob. 4.3BCQCh. 4 - If you invest 500 for one year at a rate of 8...
Ch. 4 - Prob. 4.2CCh. 4 - Suppose you invest 100 now and receive 259.37 in...Ch. 4 - Prob. 1CTCRCh. 4 - Prob. 2CTCRCh. 4 - Prob. 3CTCRCh. 4 - Prob. 4CTCRCh. 4 - Prob. 5CTCRCh. 4 - Prob. 6CTCRCh. 4 - Prob. 7CTCRCh. 4 - Prob. 8CTCRCh. 4 - Prob. 9CTCRCh. 4 - Prob. 10CTCRCh. 4 - Prob. 1QPCh. 4 - Prob. 2QPCh. 4 - Prob. 3QPCh. 4 - Prob. 4QPCh. 4 - Prob. 5QPCh. 4 - Calculating Rates of Return. Assume the total cost...Ch. 4 - Calculating the Number of Periods. At 4.7 percent...Ch. 4 - Calculating Rates of Return. In 2014, an 1874 20...Ch. 4 - Prob. 9QPCh. 4 - Prob. 10QPCh. 4 - Calculating Present Values. You have just received...Ch. 4 - Prob. 12QPCh. 4 - Prob. 13QPCh. 4 - Prob. 14QPCh. 4 - Calculating Rates of Return. Although appealing to...Ch. 4 - Prob. 16QPCh. 4 - Prob. 17QPCh. 4 - Calculating Future Values. You have just made your...Ch. 4 - Calculating Future Values. You are scheduled to...Ch. 4 - Calculating the Number of Periods. You expect to...Ch. 4 - Calculating Future Values. You have 6,150 to...Ch. 4 - Prob. 22QPCh. 4 - Calculating the Number of Periods. You can earn...Ch. 4 - LO2 24. Calculating Present Values. You need...Ch. 4 - Prob. 25QPCh. 4 - Calculating Future Values. You have 20,000 you...
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