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Calculates following data: a) An investor invested Rs.5000/- for 4 years with interest rate 12% per year. Calculate Future value (using generalised formula).
The solution is mentioned below −
FVn = PV (1+r) ^n
Here, PV = 5000, r =12%, n = 4 years
FVn = 5000 (1+12%) ^4 FVn = 5000 (1.12) ^4 FVn = Rs. 7867.60/-
b) Calculate the deposit after 12 years, if the investor deposited Rs. 80000 with 12% interest rate.
FVn = PV (1+r) ^n FVn = 80000 (1+12%) ^12 FVn = 80000 (1.12) ^12 FVn = Rs. 311678.08/-
c) An investor invested Rs. 15000 for 3 years with interest 14% compounded quarterly. Calculate Future value.
FVn = PV (1+(r/m)) ^m*n FVn = 15000 (1+ (14%/4)) ^4*3 FVn = 15000 (1.035) ^12 FVn = Rs.22666.03/-
d) A company offers 10% rate of interests for investors. Calculate effective rate of interest - Monthly - Quarterly - Half yearly
The solution is as follows −
Effective rate of interest (EIR) = (1+(r/m))-1
On monthly basis
EIR = (1+(r/m))-1 EIR = ((1 + (0.1/12)) ^12) -1 EIR = 1.1047 – 1 EIR = 10.47%
On quarterly basis
EIR = (1+(r/m))-1 EIR = ((1 + (0.1/4)) ^4) -1 EIR = 1.1038-1 EIR = 10.38%
On half yearly basis
EIR = (1+(r/m)) -1 EIR = ((1 + (0.1/2)) ^2) -1 EIR = 1.1025-1 EIR = 10.25%
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