Business
Answer:
Calculate the interest for another year taking principal amount as $550 that is calculated in the first year as follows:
If we deduct the principal amount of $500 and simple interest of $100 on $500 for 2 years, we get $5(50 × 10%) as compound interest which is nothing but interest on interest.
Answer:
To Compute the Future Value of Number the Following Formula is used:
Where
n is the Number of Years,
r is the Rate of Interest, and
p is the Principal Amount
The formula gives future value of Cash Flow
after n years when the Rate of Interest is r.
Answer:
Present value:-
Present value can be defined as "the value of series of cash flows at the end of next year at a given rate of discount".
Where, r = rate of interest
n = number of years
= Present value of cash flow.
Example:-
Find the present value of
to be required after 5 years if the interest rate is
Substituting the given data in the above formula