Financial Accounting: Information for Decisions
8th Edition
ISBN: 9781259533006
Author: John J Wild
Publisher: McGraw-Hill Education
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Question
Chapter B, Problem 1QS
Summary Introduction
Concept Introduction:
Future value is the value of present money after a period of time. Future value of present money is calculated using the interest rate and period. The present value of a sum is multiplied with the future value factor to get the future value.
To identify: the interest rate column and number of period.
Expert Solution & Answer
Explanation of Solution
| Rate | Interest rate | Number of period | |
| 12% annual rate, compounded annually | 12% | 1 | The compounding is annual, hence the rate shall remain same and period shall be 1. |
| 6% annual rate, compounded semiannually | 3% | 2 | The compounding is semiannual, hence the rate shall be half and period shall be double. |
| 8% annual rate, compounded quarterly | 2% | 4 | The compounding is quarterly, hence the rate shall be one fourth and period shall be four times. |
| 12% annual rate, compounded monthly | 1% | 12 | The compounding is monthly, hence the rate shall be divided by 12 and period shall be multiplied by 12. |
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Chapter B Solutions
Financial Accounting: Information for Decisions
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