FREQUENCY OF COMPOUNDING - Accounts and Finance for Managers

Whenever any compounding is taking place, the following methodology has to be adopted for the determination of the future value of money.
FV = PV(1+k/m)mxn
M = Number of Times Compounding is done during the year
N = number of years
K = compounding rate

Illustration

How much does a deposit of Rs.5,000 grow to at the end of 6 years. If the nominal rate of interest is 12% and frequency is 4 times a year?
The future value of Rs. 5,000 will be
= Rs.5,000(1+.12/4)4×6
= Rs.5,000(2.033)= Rs.10,165


All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Accounts and Finance for Managers Topics