Compound Interest: The future value (FV) of an investment of present value (PV) dollars earning interest at an annual rate of r compounded m times per year for a period of t years is: Show
FV = PV(1 + r/m)mtor FV = PV(1 + i)n where i = r/m is the interest per compounding period and n = mt is the number of compounding periods. One may solve for the present value PV to obtain: PV = FV/(1 + r/m)mt Numerical Example: For 4-year investment of $20,000 earning 8.5% per year, with interest re-invested each month, the future value is FV = PV(1 + r/m)mt = 20,000(1 + 0.085/12)(12)(4) = $28,065.30 Notice that the interest earned is $28,065.30 - $20,000 = $8,065.30 -- considerably more than the corresponding simple interest. Effective Interest Rate: If money is invested at an annual rate r, compounded m times per year, the effective interest rate is: reff = (1 + r/m)m - 1. This is the interest rate that would give the same yield if compounded only once per year. In this context r is also called the nominal rate, and is often denoted as rnom. Numerical Example: A CD paying 9.8% compounded monthly has a nominal rate of rnom = 0.098, and an effective rate of: r eff =(1 + rnom /m)m = (1 + 0.098/12)12 - 1 = 0.1025. Thus, we get an effective interest rate of 10.25%, since the compounding makes the CD paying 9.8% compounded monthly really pay 10.25% interest over the course of the year. Mortgage Payments Components: Let where P = principal, r = interest rate per period, n = number of periods, k = number of payments, R = monthly payment, and D = debt balance after K payments, then R = P � r / [1 - (1 + r)-n] andD = P � (1 + r)k - R � [(1 + r)k - 1)/r] Accelerating Mortgage Payments Components: Suppose one decides to pay more than the monthly payment, the question is how many months will it take until the mortgage is paid off? The answer is, the rounded-up, where: n = log[x / (x � P � r)] / log (1 + r) where Log is the logarithm in any base, say 10, or e.Future Value (FV) of an Annuity Components: Ler where R = payment, r = rate of interest, and n = number of payments, then FV = [ R(1 + r)n - 1 ] / r Future Value for an Increasing Annuity: It is an increasing annuity is an investment that is earning interest, and into which regular payments of a fixed amount are made. Suppose one makes a payment of R at the end of each compounding period into an investment with a present value of PV, paying interest at an annual rate of r compounded m times per year, then the future value after t years will be FV = PV(1 + i)n + [ R ( (1 + i)n - 1 ) ] / i where i = r/m is the interest paid each period and n = m � t is the total number of periods. Numerical Example: You deposit $100 per month into an account that now contains $5,000 and earns 5% interest per year compounded monthly. After 10 years, the amount of money in the account is: FV = PV(1 + i)n + [ R(1 + i)n - 1 ] / i =
Value of a Bond: V is the sum of the value of the dividends and the final payment. You may like to perform some sensitivity analysis for the "what-if" scenarios by entering different numerical value(s), to make your "good" strategic decision. Replace the existing numerical example, with your own case-information, and then click one the Calculate. hello HD band Assamese calculate the amount and the compound interest on rupees 5000 in two years if the rate of interest for the successive years be eat % and 10% respectively the solution in the want to calculate the amount and the compound interest on rupees 5000 at means principal is equal to rupees 5000 to hear and rate of interest is on the first year it is 8% per annum and second year it is 10% formula for finding amount equal to is equal to P bracket 1 + 1 upon 101 plus auto upon hundred Patang values wicket is equal to hear it is 5000 RS 5000 oneplus rate of interest for the first year is 8% and rate of interest for the second year is 10% after solving this week 5000 naked 108 108 close and second bracket 110 upon hundred call 2002 108 102 110/100 after serving this cricket is equal to rupees 5940 we know that compound interest is equal to amount - principal amount is rupees 5940 and principal money is rupees 5000 compound interest is equal to rupees 942 Question Find the compound interest for 3 years on Rs 5000, if the rate of interest for the successive years are 8%, 6% and 10% respectively.Hint: Find the total amount for 3 successive years then subtract the principal amount from it.The correct answer is: 1296.4 RupeesComplete step by step solution:Given that principal amount P = 5000Number of years T = 3Let R1 = 8%,R2 = 6% and R3 = 10%Total amount , …(i)On substituting the known values in (i), we get We know that, Compound interest ( CI) = total amount (A) - principal amount (P)So, Compound interest ( CI) = 6296.4 - 5000 = 1296.4 RupeesBook A Free DemoMobile*
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What will be the compound interest on 5000 in 2 years?∴ Compound interest is Rs.1050
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What is the yearly compound amount on Rs 5000 for 2 years at the rate of 10 Pa?Answer: So, the compound interest on ₹5000 for 2 years at the rate of 10% is ₹1050 .
What is the compound interest on rupees 2500 for 2 years at rate of interest 4% per annum?= 2704 - 2500 = Rs. 204 C.I. - S.I.
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