a.
To determine: The
Continuous Compounding:
Continuous compounding is the condition when interest is earned continuously and not annually, quarterly or half yearly. It is the maximum limit of an interest that could be reached on a given interest rate.
Given,
Present value is $1,900.
Number of years is 9 years.
Rate of interest is 12% per annum compounded continuously.
b.
To determine: The future value of $1,900 continuously compounded for 5 years at an annual percentage rate of 8%.
Given,
Present value is $1,900.
Number of years is 5 years.
Rate of interest is 8% per annum compounded continuously.
c.
To determine: The future value of $1,900 continuously compounded for 17 years an annual percentage rate of 5%.
Given,
Present value is $1,900.
Number of years is 17 years.
Rate of interest is 5% per annum compounded continuously.
d.
To determine: The future value of $1,900 continuously compounded for 10 years at an annual percentage rate of 9%.
Given,
Present value is $1,900.
Number of years is 10 years.
Rate of interest is 9% per annum compounded continuously.
Want to see the full answer?
Check out a sample textbook solutionChapter 4 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
- Find the following values (compounding/discounting occurs annually): A. An initial $500 compounded for 10 years at 6% B. An initial $500 compounded for 10 years at 12% C. The present value of $500 due in 10 years @ 6% D. The present value of $1,552.90 due in 10 years @ 12% and @ 6%arrow_forwardFind the following values Compounding/discounting occurs at the end of each year. a. An initial $200 compounded for 10 years at 4% b. An initial $200 compounded for 10 years at 8% c. The present value of $200 due in 10 years at 4% d. The present value of $1,870 due in 10 years at 8% and at 4% e. Define present value and illustrate it using a time line with data from part d. How are present values affected by interest rates?arrow_forwardPresent value of an annuity Determine the present value of $190,000 to be received at the end of each of 4 years, using an interest rate of 5.5%, compounded annuall a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year X Total present value b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar. SAarrow_forward
- Using the compound interest formula, calculate both the value of the investment and the interest earned after the given time periods. a) $4000.00 for five years at 7% compounded semi-annuallyarrow_forward3. Determine the future values if OMR 5,000 is invested in each of the following situations: a. 5 percent for ten years b. 7 percent for seven years c. 9 percent for four yearsarrow_forwardAt a annual effective rate of interest i, payment of $100 from now,$200 two years from now and $100 four years from now have a total present value of $300. Calculate i A.11.7% B.13% C.14.5% D.15.8% E.16.9%arrow_forward
- 1)Find the nominal annual rate of interest for the following investment. Principal 6900.00 Future Value $2167.17 Time due 3 years Frequency of Conversion semi-annually The nominal annual rate of interest is % compounded semi-annually. (Round the final answer to four decimal places as needed. Round all intermediate values to six decimal places as needed.)arrow_forwardGive typing answer with explanation and conclusion Compute the future value of $1,000 compounded annually for A-10 years at 5 percent B-10 years at 7 percent C-20 years at 5 percent D why is the interest earned in part c not twice the amount earned in part a?arrow_forwardIf $2500 were invested for 5 years at 10% nominal interest compounded daily, what would be the future amount? Select one: a. $4121.73 b. $6521.73 c. $3121.73 d. $5121.73arrow_forward
- Complete the following using compound future value. (Use the Table provided.) (Round your answers to the nearest cent.) Time Principal Rate Compounded Amount Interest 10 years $17,100 4% Annually $ $arrow_forwardTask 3. Compute the future value of the following annuity investments: s beonemme 1. P6,000 quarterly investment at 8% interest compounded quarterly for 8 years moT 2. P4,000 monthly investment at 6% interest compounded monthly for 4 years 3. P8,000 semi-annual investment at 9% interest compounded semi-annually for 10 yeararrow_forward1. Calculate the present value of $8,000 receive five years from today if your investment pay a. 6 percent compound annually b. 8 percent compound annually c. 10 percent compound annually d. 10 percent compound semiannually e. 10 percent compound quarterlyarrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education