Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Question
Chapter B, Problem 1QS
To determine
Identify the interest rate column and the number of period’s row that will be used for the following rates.
Expert Solution & Answer
Explanation of Solution
Future value:
The future value is value of present amount compounded at an interest rate until a particular future date
1.
When annual rate is 12% and compounded annually. The interest rate column will be 12% and the number of periods will be 2.
2.
When annual rate is 6% and compounded semi-annually. The interest rate column will be 3% and the number of periods will be 4 because when future value is compounded semi-annually, the number of years will be doubled and the rate of interest will decrease by half of the given interest rate.
3.
When annual rate is 8% and compounded quarterly. The interest rate column will be 2% and the number of periods will be 8 because, when future value is compounded quarterly, the number of years will be increased by four times and the rate of interest will decrease by quarter of the given interest rate.
4.
When annual rate is 12% and compounded monthly. The interest rate column will be 1% and the number of periods will be 24, because the interest rate for each month will be 1% and number of period will be 24 because future value is estimated for 2 years.
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Students have asked these similar questions
How do I find the annual percentage rate with the effective interest rate?
For 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
a.
9%
12
Annually
b.
8%
7
Quarterly
C.
12%
16
Semiannually
%
%
%
(b) Number of Periods
2. In a present value of an annuity of 1 table: (Round "Rate of Interest" answers to 1 decimal place, e.g. 4.5% and other answers to O decimal
places, e.g 45.)
Annual
Number of
Years
Rate
Invested
Number of
Rents
Involved
Frequency of
Rents
(a) Rate of Interest
(b) Number of Periods
a.
10%
28
28
Annually
b.
10%
15
30
Semiannually
%
%
8%
7
28
Quarterly
%
Derive an equation to find the end-of-year future sum F that is equivalent to a series of n beginning-of-year payments B at interest rate i. Then use the equation to determine the future sum F equivalent to six B payments of $100 at 8% interest.
Chapter B Solutions
Principles of Financial Accounting.
Ch. B - Prob. 1QSCh. B - Prob. 2QSCh. B - Prob. 3QSCh. B - Prob. 4QSCh. B - Prob. 5QSCh. B - Beene Distributing is considering a project that...Ch. B - Prob. 7QSCh. B - Prob. 1ECh. B - Prob. 2ECh. B - Prob. 3E
Ch. B - Prob. 4ECh. B - Prob. 5ECh. B - Prob. 6ECh. B - Prob. 7ECh. B - Number of periods of an investment Keith Riggins...Ch. B - Prob. 9ECh. B - Prob. 10ECh. B - Prob. 11ECh. B - Prob. 12ECh. B - Prob. 13ECh. B - Prob. 14ECh. B - Prob. 15ECh. B - Future value of an annuity Kelly Malone plans to...Ch. B - Prob. 17ECh. B - Practical applications of the time value of money...Ch. B - Using present and future value tables For each of...
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