Similarly the present value of a mixed stream of cash

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Unformatted text preview: annual rate—is quoted on credit cards and loans. The annual percentage yield (APY)—an effective annual rate—is quoted on savings products. The interest factor formulas for compounding more frequently than annually are given in Table 4.9. LG5 Describe the procedures involved in (1) determining deposits to accumulate a future sum, (2) loan amortization, (3) finding interest or growth rates, and (4) finding an unknown number of periods. The periodic deposit to accumulate a given future sum can be found by solving the equation for the future value of an annuity for the annual payment. A loan can be amortized into equal periodic payments by solving the equation for the present value of an annuity for the periodic payment. Interest or growth rates can be estimated by finding the unknown interest rate in the equation for the present value of a single amount or an annuity. Similarly, an unknown number of periods can be estimated by finding the unknown number of periods in the equation for the present value of a single amount or an annuity. LG6 (Solutions in Appendix B) Future values for various compounding frequencies Delia Ma...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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