TIME VALUE OF MONEY

Present Value of an Annuity Payable PTHLY An annuity payable PTHLY refers to equated/level payment, to he made in intervals less than one year where p denotes the frequency of payment (e.g 12 for monthly payment and 2 for half yearly payment). The present values of an...
TIME VALUE OF MONEY

EXAMPLE 2-A.2 The Premier Rank 1 offers to 10 percent interest on a deposit of one year. Assuming (i) annual, (ii) half-yearly and (iii) quarterly frequency of interest compute the effective rates of interests in the three alternatives. Solution Assuming a deposit of...
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Nominal Rates of Interest and Discount When compounding/discounting has to be done a: intervals less than a year, a distinction should be made between (i) nominal and (iii) effective rates of interest. The coupon rate of interest is ‘called the nominal rate of...
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EXAMPLE 2-A.1 Given that PVIF (i, 1) = 0.95 find the value of i and d. Solution PVIF (i, 1) = 0.95 [vfb id=1]
TIME VALUE OF MONEY

Effective Rates of Interest and Discount The effective rate of discount is used in computing the present values of certain types of annuities. Assuming as the rate of interest per annum, an investor who deposits Re 1 at the beginning of the year would receive Re (1 +...
TIME VALUE OF MONEY

APPENDIX 2-A This Appendix further develops some aspects of application of compounding and discounting techniques. Those not interested in the detailed treatment of these aspects may skip over the Appendix. [vfb id=1]