This is a slide from my book problems and solutions in Financial Management: step by step approach. The book is available for sale at Amazone and Kindle. The link is as below:
http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=RAJNI+KANT+RAJHANS
This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/capital-investment-analysis-230
Capital Investment Analysis
Also called Capital Budgeting - a complex topic simplified in an easy to understand presentation which is completely self-explanatory. Explains the framework for financial analysis with examples and provides practical insights. Can be used for reference, training & self paced learning. The presentation includes examples worked in an Excel sheet.
Covers:
* The nature & characteristics of long term investments made by corporations
* The problem associated with measuring the rate of return with long term investments
* The approach to solving this problem
* The key methods used in calculating the rate of return and evaluating alternatives
* The practical aspects of the various inputs required to calculate the return on investment
* The basics of the risks associated with long term investments & how to factor ?in such risks
* The strategic considerations involved in long term investment decisions
* The processes involved in long term investment decisions & its implementation
This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/capital-investment-analysis-230
Capital Investment Analysis
Also called Capital Budgeting - a complex topic simplified in an easy to understand presentation which is completely self-explanatory. Explains the framework for financial analysis with examples and provides practical insights. Can be used for reference, training & self paced learning. The presentation includes examples worked in an Excel sheet.
Covers:
* The nature & characteristics of long term investments made by corporations
* The problem associated with measuring the rate of return with long term investments
* The approach to solving this problem
* The key methods used in calculating the rate of return and evaluating alternatives
* The practical aspects of the various inputs required to calculate the return on investment
* The basics of the risks associated with long term investments & how to factor ?in such risks
* The strategic considerations involved in long term investment decisions
* The processes involved in long term investment decisions & its implementation
Approaches to determine appropriate capital structure - EBIT-EPS Approch
anybody can join my google class (financial Mangement)
by entering class code : avkkvj5
This presentation is an overview of Capital Structure Theories.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
This analysis is an important tool used to optimize the capital structure for highest earnings for shareholders
It helps in understanding the sensitivity of EPS at given level of Earning before Interest & Tax under different sources of financing
It helps in analyzing how capital structure decision is important to raise the value of firm
An optimal financing structure minimizes the cost of capital and maximizes the earnings
Earning Per Share under different Capital structure plans
Plan 1 ( Only Equity Shares )
EPS = (EBIT (1−Tax rate))/(No. of Outstanding Shares)
Plan 2 ( Equity Shares & Debt )
EPS = ((EBIT −Interest) (1−Tax rate))/(No. of Outstanding Shares)
Plan 3 (Equity, Debt & Preference Shares)
EPS = ((EBIT −Interest) (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
Plan 4 (Equity shares & Preference Shares)
EPS = (EBIT (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
Thank You For Waching
Subscribe to DevTech Finance
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
Organisational Performance Measures. This is only for study purpose, The content is refereed from various available sources. Through this, the learner, decision makers are may got benefited.
Understand the objectives and functions of financial management. Get your concepts clear on what does financial management mean, why is financial management improtant and many more.
Techniques of Financial Statement Analysis: Introduction, Objectives of financial statement analysis, various techniques of analysis viz Common Size Statements, Comparative Statements, Trend Analysis, Ratio Analysis, Funds Flow Statement & Cash Flow Statement
The Financing Decision is yet another crucial decision made by the financial manager relating to the financing-mix of an organization. It is concerned with the borrowing and allocation of funds required for the investment decisions
Approaches to determine appropriate capital structure - EBIT-EPS Approch
anybody can join my google class (financial Mangement)
by entering class code : avkkvj5
This presentation is an overview of Capital Structure Theories.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
This analysis is an important tool used to optimize the capital structure for highest earnings for shareholders
It helps in understanding the sensitivity of EPS at given level of Earning before Interest & Tax under different sources of financing
It helps in analyzing how capital structure decision is important to raise the value of firm
An optimal financing structure minimizes the cost of capital and maximizes the earnings
Earning Per Share under different Capital structure plans
Plan 1 ( Only Equity Shares )
EPS = (EBIT (1−Tax rate))/(No. of Outstanding Shares)
Plan 2 ( Equity Shares & Debt )
EPS = ((EBIT −Interest) (1−Tax rate))/(No. of Outstanding Shares)
Plan 3 (Equity, Debt & Preference Shares)
EPS = ((EBIT −Interest) (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
Plan 4 (Equity shares & Preference Shares)
EPS = (EBIT (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
Thank You For Waching
Subscribe to DevTech Finance
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
Organisational Performance Measures. This is only for study purpose, The content is refereed from various available sources. Through this, the learner, decision makers are may got benefited.
Understand the objectives and functions of financial management. Get your concepts clear on what does financial management mean, why is financial management improtant and many more.
Techniques of Financial Statement Analysis: Introduction, Objectives of financial statement analysis, various techniques of analysis viz Common Size Statements, Comparative Statements, Trend Analysis, Ratio Analysis, Funds Flow Statement & Cash Flow Statement
The Financing Decision is yet another crucial decision made by the financial manager relating to the financing-mix of an organization. It is concerned with the borrowing and allocation of funds required for the investment decisions
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.
Problems and solutions in financial management step by step approach
1. Problems & Solutions in Financial Management :
A Step by Step Approach
By :
Rajni Kant Rajhans
Lecturer (Finance)
Amity Business School, Amity University
Haryana, India
Email id: rajnikantrajhans@gmail.com
2. Features
This book has been written uniquely in following ways:
1. Student friendly.
2. Weak/ new to finance students are focus centre.
3. Chapters divided in particular types of problems.(ex:
Type I, Type II, …..)
4. Step by step approach provided for all types of
problems.
5. Steps provided suits to all problems of that types.
6. Approx 300 solved numerical using suggested steps.
3. Chapter 1: Time Value of Money
Type I: Problems on Future Value
Type II: Problems on Future Value for different frequency of compounding
Type III: Problems on Present Value
Type IV: Problems on effective rate of interest
Type V: Problems on Future value of annuity
Type VI: Problems on Present Value of Annuity
Type VII: Problems on Perpetuity
Type VIII: Problems on Annuity Due
Type IX: Problems on Continuous Compounding
More Problem for Practice
4. Learning Objective: To enable reader to understand the practical
applications of time value of money and related concepts like:
compounding, discounting etc
Concepts Rechecked:
• Time Value of Money
“A dollar (rupee) today worth more than a dollar (rupee) tomorrow”. This is
because of: risk associated, consumption preference and investment
options available on today’s money.
Future Value
The value of a rupee (dollar) invested today for a time period ‘t’ at a rate of
interest of ‘r%’.
Future Value (FV) = P [1+r/100]t
If rate of interest is calculated at a frequency of f then,
FV = P[1+r/(100×f)](t×f)
Annuity
It is inflows (or Outflows) of a particular sum of money each year for a
particular number of Years
5. Present Value
It is the amount that should be invested today to have a particular return
(future value) after a specified period. Present value of a single cash
flow after time ‘t’ is :
P = Ft/ (1+ r)t
Present Value of Annuity
P = A/r [1 – 1/(1+r)t]
Perpetuity
It is an annuity having infinite life. Present value of annuity = A/r
Annuity Due
It is an annuity having inflows(or outflows) starting at the beginning of the
period.
Future Value of Annuity Due = Future Value of Annuity × (1+r)
6. Effective Interest Rate
If frequency of compounding is more than one in a
year, the rate of return is higher than nominal rate of
interest, this rate of interest is known as effective rate
of interest.
Continuous Compounding
Frequency of compounding is considered at the
smallest fraction of time.
7. TYPE I:
Problems on Time Value of Money:- Future Value
•
•
•
•
Step I: Identify the sum that is being invested. (P)
Step II: Identify the rate of interest. ( r)
Step III: Identify the time period of investment. (t)
Step IV: Apply the formula:
FV = P[ 1+ r/100]t
Ex:- Ram wants to invest $ 5000 for a period of 5 Years
The rate of interest is 10% per annum (p.a.). Find the
sum of money Ram will get after 5 Years
8. Solution
• Step I: Identify the sum that is being invested. P
= $ 5000
• Step II: Identify the rate of interest. r = 10% p.a.
• Step III: Identify the time period of investment.
t= 5 Years
• Step IV: Apply the formula:
FV = P[ 1+ r/100]t = 5000 [ 1+ 10/100]5= $
8052.55
9. PRACTICE PROBLEMS
Q1. Mr. A invested $ 10,000 in a fixed deposit having
rate of interest of 5% per annum for 10 Years How
much amount will he get after 10 Years?
Q2. Mr. B wants to have a sum of $ 5800 after 2 Years
He has two investment options to select one for his
investment objective:
Investment Option 1: Rate of interest of 8% p.a.
Investment Option 2: Rate of interest of 6% p.a.
If Mr. B has $ 5000 to invest for 2 Years, which
investment option will meet his objective?
10. Type II
Problems on Future Value for different frequency of
compounding
• Step I: Identify the frequency of compounding i.e. f.
• Step II: Multiply the time given with frequency.
( t×f).
• Step III: Divide the rate of interest given with
frequency. ( r/f)
• Step IV: Apply the formula:
FV = P[1+r/(100×f)](t×f)
Q1. Shyam wants to calculate how much money he will get after 2
Years at a rate of interest of 10% p.a. compounded half-yearly on
a sum of money of $ 5000?
11. Solution
• Step I: Identify the frequency of compounding
i.e. f = half-yearly = 2 times in a year= 2.
• Step II: Multiply the time given with frequency.
t×f = 2 Years× 2 = 4 periods
• Step III: Divide the rate of interest given with
frequency. r/f = 10% / 2 = 5 % per period.
• Step IV: Apply the formula:
FV = P[1+r/(100×f)](t×f)= 5000[ 1+ 10/(100×2)]4=
5000[1.05]4= $ 6077.53
12. PRACTICE PROBLEMS
Q1. Branch Manager of S.B.I. has to answer question
of his client “how much will I get after 2 Years by
investing $ 10,000 in your bank?” The rate of
interest S.B.I. offers is 5% p.a. compounded
quarterly.
Q2. Which of the two investments is better?
Option I: Investment of $ 1000 for 2 Years at 10 %
p.a. compounded annually.
Option II: Investment of $ 900 for 2 Years at 15.36%
p.a. compounded semi-annually.
Q3……
Q4……. Etc.
13. TYPE III: Problems on Present Value
Step I:………………..
Step II: ………………
Step III: …………..
………..
Etc.
Intentionally left blank
14. TYPE IV: Problems on effective rate of interest
Step I: Identify the given rate of interest. ( r)
Step II: Identify the frequency at which interest is
calculated. (f )
Step III: Divide the rate of interest by frequency and
multiply with the time period of investment. ( r/ f
& t× f)
Step IV: Apply the formula:
reffective = [1+r/f](t×f) -1
Example: Find the effective rate of interest if interest
is calculated at 9% p.a. compounded quarterly for
1 year?
15. Solution
Step I: Identify the given rate of interest. r = 9%
Step II: Identify the frequency at which interest is
calculated. f = quarterly = 4 times in a year= 4
Step III: Divide the rate of interest by frequency
and multiply with the time period of
investment. r/ f = 9%/ 4 = 2.25% & t× f = 1
Years× 4 = 4 period.
Step IV: Apply the formula:
reffective = [1+r/f](t×f) -1 = [1+2.25%]4-1= [1.0225]41 = 9.03 %.
16. PRACTICE PROBLEMS
Q1. Find the effective rate of interest, if rate of
interest is 8% p.a. compounded monthly?
Q2. Find the effective rate of interest in the
following given conditions:
a). r = 5% p.a. compounded half-yearly.
b). r= 10% p.a. compounded weekly.
c). r= 1% p.a. compounded daily.
17. Type V: Problems based on present value of Annuity
Step I: ………………………
Step II: …………………….
Etc.
Intentionally left blank
18. Type VII: Problems on Perpetuity
Step I: Identify cash inflow/ outflow installments (A).
Step II: Identify rate of interest (r).
Step III: Apply the formula:
PV of annuity = A/r.
Q1. How much you should invest today to earn an
installment of $ 100 for infinite life, if rate of
interest is 8% p.a.?