Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 3, Problem 18P
Summary Introduction

Future value:

Future value refers to that value of an investment which will worth at a specified time in future. In simple words, expression of current investment in future dollars on basis of particular rate of interest is known as future value.

Interest on interest

It refers to that amount of interest which is calculated on the interest received from the invested amount. The difference between actual investment and its future value includes interest and interest on interest. So, if the amount of interest will be deducted from the difference of actual investment and its future value, it will show only interest on interest.

To determine:

  1. Total balance in the account after 3 years and balance correspondence to “interest on interest”.
  2. Total balance in the account after 25 years and balance correspondence to “interest on interest”.

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Chapter 3 Solutions

Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)

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