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[DOC File]Section 2: Financial Mathematics
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Nominal interest rate is unadjusted for inflation, for example, a annual nominal interest rate compounded monthly has a periodic (monthly) rate of . Effective annual rate is an imagined rate that would yield the same final value as the compounding plan over one year.
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[DOC File]ANSWERS TO REVIEW QUESTIONS
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the effective annual rate of interest will increase. This is due to the fact that the more frequently interest is compounded, the greater the future value. In situations of intra-year compounding, the actual rate of interest is greater than the stated rate of interest. 4-15
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[DOC File]Time Value of Money
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For ordinary annuities, the excel formula is = PV(interest rate, number of periods, payment). In this problem, = PV(10%,3,-100), gives a result of 248.96. For the future value, it would be = FV(10%,3,-100), with a result of 331.
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[DOC File]FUTURE VALUE AND PRESENT VALUE FORMULAS
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24. Your boss wants to know the effective interest rate on a loan that requires a 10 percent compensating balance, has a 12 percent interest rate, and the lender takes the interest payment out of the loan proceeds at the beginning. [15.38%] 25. The Kane Corporation plans to place an order with a …
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[DOCX File]4 - Institute of Bankers in Malawi
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Using an Excel formula. using a financial calculator. Present Value tables (Total 15 marks) ... Effective annual rate . versus . Annual Percentage rate (3 marks) Suppose that K1, 000,000 is deposited into a bank account which earns interest at the nominal rate of 12%, compounded quarterly, what is the value of the investment after 1year.
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[DOCX File]Replacement Reserve Spreadsheet Instructions
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Enter the interest rate . earned on. replacement reserve account. into the cell identified as “Savings interest rate.” (Cell E60) Of course, this figure will fluctuate so it is best to use a conservative rate such as 1%. Enter the amount estimated for inflation. on construction costs
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[DOC File]Chapter 3 Time Value of Money
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What is the value of the investment after two years if the interest rate is 10%? Solution: The formula for calculating the future value (FV) of a sum is: FV = P × (1 + r)n. FV = $100 × (1 + 10%)2 = $121 1.2.2 Sometimes financial transactions take place on the basis that interest will be calculated more frequently than once a year. 1.2.3 EXAMPLE 2
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[DOC File]“In signing a 10-year, $252 million free-agent contract ...
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Excel also has a formula to convert nominal interest rates to effective annual interest rates: =EFFECT(nominal_rate,npery) where npery represents the number of compounding periods per year.
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[DOC File]The major formulas for present value (these will reappear ...
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Revenue - COGS = Gross Margin - S, G &A - Depreciation = EBIT - EBIT x t (t is the effective tax rate) = EBIAT + Depreciation - Increase in Working Capital (WC = A/R + Inv. – A/P) - Capex = FCF to the Firm Example: Problem Set #4, Q4.
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Effective interest rate formula excel