1 period returning $100 on a $1000 investment is a 10% gain.
II) You have to compute the RATE given the present value, future value, and number of periods (in this case 2)
Using your Time value of money keys on a financial calculator, or excel RATE function plug these imputs in to get the semi annual rate. Multiply the rate by two to get you 9.76%
III) Same method but using 12 periods multiplying the RATE result by 12 gives you 9.57%
The returns are lower because the returns are prorated over each month, so you are returning a little bit less on more income since it is accrued each month so it results in the same dollar amount.
I am investing Rs. 100000 per annaum in Public provident Fund at post office @ 8.75% compound interest. What will be my returns after 15 years & 20 years.
Need some help on a question as part of homework:
An investor receives $1,100 in one year in return for an investment of $1,000 now. What is the percentage return per annum with:
i) Annual compounding
ii) Semiannual compounding
iii) Monthly compounding
For i) Is it simply,
100/1,000 = 10% ?
How would I do ii) and iii) ?
