Effective Rate of Interest.pptx effective rate of interest

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1. Effective Rate of Interest

2. (1+i) n-1 P = 100 R = 10 % Compounded Half yearly 100x10/100 x6/12 = 5 A = 100 + 5 = 105 105x10/100x6/12 = 5.25 105 + 5.25 110.25 110.25-100 = 10.25 10% Compounded Half Yearly 10.25 % Compounded Yearly

3. Which One is Better 8% Compounded Quarterly or 8.5% Compounded Annually? (1+i) n-1 Effective rate of Interest Quarterly (1+0.8/4) 1x4 -1 0.0824x100 8.24% Option II is Better 8% Compounded Quarterly 8.24% Compounded Yearly

4. Illustration 1 : Mr Vishal takes a Loan of 10,00,000 Payable in Yearly Installments of 1,00,000 for a period of 12 Years Illustration 2 Mr Virat Deposits 10,000 Every Month & He Will Receive 5,00,000 at the end of 5 years Illustration 3 :Mr. Rohit Will Repay 1,00,000 in 10 Installments @ 10% P.a in 10 Years

5. Illustration 1 : Mr Vishal takes a Loan of 10,00,000 Payable in Yearly Installments of 1,00,000 for a period of 12 Years Illustration 2 Mr Virat Deposits 10,000 Every Month & He Will Receive 5,00,000 at the end of 5 years Illustration 3 :Mr. Rohit Will Repay 1,00,000 in 10 Installments @ 10% P.a in 10 Years