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T N N I PV FV: Chapter 4: Mathematics of Finance

The document discusses two examples of calculating future values of investments using compound interest formulas. The first example calculates that depositing RM5,000 at 12% interest compounded quarterly will be worth RM6,719.50 in 2.5 years. The second example determines that Rushdan needs to deposit RM4,231.66 today in an account with an 8.7% annual dividend rate to have RM5,000 in two years for a mountain bike.

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381 views1 page

T N N I PV FV: Chapter 4: Mathematics of Finance

The document discusses two examples of calculating future values of investments using compound interest formulas. The first example calculates that depositing RM5,000 at 12% interest compounded quarterly will be worth RM6,719.50 in 2.5 years. The second example determines that Rushdan needs to deposit RM4,231.66 today in an account with an 8.7% annual dividend rate to have RM5,000 in two years for a mountain bike.

Uploaded by

wawan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER 4 : MATHEMATICS OF FINANCE

1. You deposit RM5, 000 today in an account drawing 12% compounded


quarterly. How much will you have in the account at the end of 2 1/2 years?

  i 
FV  PV 1     n * t
  n 

PV= RM 5000
i = 0.12
n =4
t = 2 1/2 years

  0.12 
FV  50001   10
  4  = RM 6719.50

2. .Rushdan plans to buy a mountain bike to enable him to participate in the


Hardrock Jeli Ride Competition that cost him RM5000. The competition will be
held in next two years. How much should Rushdan deposits in an investment
account, specifically his ASB account today if the annual dividend rate is 8.7
%?

  i 
FV  PV 1     n * t
  n 

FV = RM 5000
i = 0.087
n= 1
t= 2

  0.087 
5000  PV 1    2
  1 
5000  PV *1.181569
5000
 PV
1.181569

PV= RM 4231.66

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