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C budgeting

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › C budgeting

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • July 20, 2021 at 5:47 am #628862
    johnbriane
    Member
    • Topics: 170
    • Replies: 160
    • ☆☆☆

    The effective interest rate of receiving 10% interest per annum compounded on a monthly basis for 12 months is the same as receiving 10.47 % interest per annum with no compounding

    Please explain this with an example sir thank you

    July 20, 2021 at 8:27 am #628886
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54702
    • ☆☆☆☆☆

    10% per annum is equivalent to 10/12 = 0.8333% per month.

    If it is compounded, then the yearly equivalent is (1.008333)^12 -1 = 0.1047 (i.e. 10.47%)

    I do explain this in my free lectures on interest 🙂

    July 20, 2021 at 1:55 pm #628915
    johnbriane
    Member
    • Topics: 170
    • Replies: 160
    • ☆☆☆

    10% compounded on a monthly basis means what sir

    Does that 10% in month 1
    And in month two 10% + 10% = 20%

    Please guide sir

    Thank you

    July 21, 2021 at 7:46 am #628967
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54702
    • ☆☆☆☆☆

    It means that when interest is added then the interest in the following month is on the whole amount.

    Again, I explain this in my free lectures and you cannot really expect me to type them all out here 🙂

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