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Finance Assignment Compound Interest

   

Added on  2020-04-01

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Running head: FINANCE1 FinanceName:Institution:Date:
Finance Assignment Compound Interest_1
FINANCE2Question 1Future value calculations if the payments are made at the end of the year with annual compounding FV = P * {(1+R)^N) - 1) / R}FV= 1000(1+10%) ^5)- 1/ 0.1FV= $ 1000(1.1^ 5)-1/0.1 = $ 1000( 1.6105-1 )/ 0.1 = $ 1000 ( 0.6105) / 0.1 = $ 610.5 /0.1 = $ 6105(b) Future value calculation if investment is done each FV= P * ( 1+R) ^ N) -1 / R 1st Year FV= $1000 (1 + 10%) ^1) -1/ R = $1000 (0.1) /0.1
Finance Assignment Compound Interest_2
FINANCE3 = $10002nd year FV = $1000 (1 + 10%) ^1) -1/ R = $1000 (0.1) /0.1 = $10003RD Year FV= $1000 (1 + 10%) ^1) -1/ R = $1000 (0.1) /0.1 = $10004TH Year FV= $1000 (1 + 10%) ^1) -1/ R = $1000 (0.1) /0.1 = $10005th Year FV= $1000 (1 + 10%) ^1) -1/ R = $1000 (0.1) /0.1 = $1000After 5 years compound=( P +1000*5)
Finance Assignment Compound Interest_3
FINANCE4 =$ 6000(c) Monthly compounding for an investmentMonthly Compounding: FV = $1,000 x (1 + (15% / 60)) ^ (12 x 5) = FV= 1000(1+(10%/ 60)^ (12*5 )FV= $ 1000(1 + (0.001667) ^60 = $ 1000(1.001667) ^60 = $ 1000 (1.105) = $ 1,105.07(d)Explain what is meant by continuous compounding.(2 marks)This means an instance mathematically where the principle amount is constantly and continuously earning interest and the interest being earned is also earning its own interest continuously. It can also be defined as the limit mathematically that the compound interest can and will earn or a process of time value for money accumulation in an instantaneous and continuous basis(Grangaard, 2004).
Finance Assignment Compound Interest_4

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