BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The interest earned in year two is $12.00 and year one is $12.72.
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The interest earned in year one is $12.00 and year two half is $12.72.
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The interest earned in year one is $12.00 and year two is $12.72.
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The future value would be greater if the interest rate were lower.
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Detailed explanation-1: -B ) The FV is $ 224.00 . C ) The FV is $ 224.72 . D ) This question is irrelevant because there are no two-year investments that earn an average of 6 % per year . Answer: C ) The FV is $ 224.72 .
Detailed explanation-2: -What is the annual rate of interest if ₱265 is earned in four months on an investment of ₱15, 000? Ans: 5.3%
Detailed explanation-3: -The formula and calculations are as follows: Effective annual interest rate = (1 + (nominal rate ÷ number of compounding periods)) ^ (number of compounding periods)-1.
Detailed explanation-4: -You can also run it backwards: if you want to double your money in six years, just divide 6 into 72 to find that it will require an interest rate of about 12 percent.
Detailed explanation-5: -The formula for EAR is: EAR = (1 + i/n)^n-1 where i is the stated interest rate as a decimal and n is the number of interest payments per year.