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Explain the difference between compounding and discounting and how they value the cash flows of the organization?
Compounding means that you are adding money to the capital. Discounting means that some of the cost is being taken away.
What is the difference in the total amount of interest earned on a 1000 investment after 5 years with compounding interest quarterly versus compounding interest monthly in Activity 10.5?
The difference in the total amount of interest earned on a 1000 investment after 5 years with quarterly compounding interest versus monthly compounding interest in Activity 10.5 is due to the frequency of compounding. Quarterly compounding results in interest being calculated and added to the principal 4 times a year, while monthly compounding does so 12 times a year. This difference in compounding frequency affects the total interest earned over the 5-year period.
Is daily compounding a more effective method than monthly compounding for maximizing returns on investments?
Yes, daily compounding is generally more effective than monthly compounding for maximizing returns on investments because it allows for more frequent accrual of interest on the principal amount.
What is discounting of loan?
in banking and investing fee
What are the differences in returns between daily and monthly compounding for an investment with a fixed interest rate?
The main difference between daily and monthly compounding for an investment with a fixed interest rate is the frequency at which the interest is calculated and added to the investment. Daily compounding results in slightly higher returns compared to monthly compounding because interest is calculated more frequently, allowing for the compounding effect to occur more often.
What is discounting principles in managerial economic?
The discounting principle in managerial economic is the opposite of compounding. It is based on the present value of a sum of money you are getting in the future, the discount rate and the frequency.
Discounting is compounding in reverse?
yes
Explain the difference between compounding and discounting and how they value the cash flows of the organization?
Compounding means that you are adding money to the capital. Discounting means that some of the cost is being taken away.
Why the proses of discounting and compounding are related?
Discounting and compounding are related because both processes involve the time value of money, reflecting how the value of money changes over time. Compounding calculates the future value of an investment by applying interest over time, while discounting determines the present value of future cash flows by removing the effects of interest. Essentially, discounting is the reverse of compounding; where compounding grows an amount, discounting reduces it to its present value, both using the same interest rate concept. Together, they provide a comprehensive understanding of how money behaves over time in financial contexts.
What is the inverse of compounding interest?
discounting..ie....1/(1+r)^n
What is the relationship between discounting and compounding?
The only relationship between these two things is that it gives a consumer more product for less money. Discounting is taking an amount of money off a product and compounding is giving more than 1 product at the same price as 1.
What is the difference between compounding and discounting?
Compounding finds the future value of a present value using a compound interest rate. Discounting finds the present value of some future value, using a discount rate. They are inverse relationships. This is perhaps best illustrated by demonstrating that a present value of some future sum is the amount which, if compounded using the same interest rate and time period, results in a future value of the very same amount.
Fundamental concepts of managerial economics?
1 .principle of opportunity. 2. principles of incremental cost and revenue. 3.principles of time perspective. 4.principles of discounting. 5.equi- marginal principles. 6.Optimisation.
What are the Discounting and Non-discounting Criteria of Capital Budgeting?
IRR
How do you explain discounting of accounting policies?
Explain discounting of accounting policies
Mechanics of compounding in an annuity?
mechanics and compounding
Does annual compounding pay more money than daily compounding?
It all depends with the amount of the annual or daily compounding. In most cases it is however the daily compounding that pays more than the annual compounding.
