{"id":19909,"date":"2013-05-09T16:49:03","date_gmt":"2013-05-09T11:19:03","guid":{"rendered":"http:\/\/vskills.in\/certification\/tutorial\/?p=19909"},"modified":"2024-04-12T14:15:56","modified_gmt":"2024-04-12T08:45:56","slug":"wealth-management-compounding","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/wealth-management-compounding\/","title":{"rendered":"Wealth Management | Compounding"},"content":{"rendered":"<p><a class=\"vsc\" href=\"http:\/\/www.vskills.in\/certification\/Certified-Wealth-Manager\"><span class=\"vsc-cn\" style=\"text-align: center;\"><span style=\"color: red;\">Certify and Increase Opportunity.<\/span><br \/>\n<span style=\"color: green;\">Be <\/span><br \/>\nGovt. Certified Wealth Manager<br \/>\n<\/span><\/a><\/p>\n<h1>Compounding<\/h1>\n<h2>The Time Value of Money<\/h2>\n<p>The principle of time value of money is the notion that the sooner a given amount of money is received the more valuable it is, due to its capacity to earn interest.<\/p>\n<p>Central to the time value principle is the concept of interest rates. Interest rates are fixed in the marketplace and allow for equivalent relationships to be determined by forces of supply and demand. In an environment where the market-determined rate is 10%, it would be said that borrowing (or lending) Rs. 1,000 today is equivalent to paying back (or receiving) Rs. 1,100 a year from now.<\/p>\n<h3>The Five Components of Interest Rates<\/h3>\n<ul>\n<li>Real Risk-Free Rate<\/li>\n<li>Expected Inflation<\/li>\n<li>Default-Risk Premium<\/li>\n<li>Liquidity Premium<\/li>\n<li>Maturity Premium<\/li>\n<\/ul>\n<h3>Time Value of Money Calculations<\/h3>\n<p>The\u00a0\u2018stated annual rate\u2019 (quoted rate) is the interest rate on an investment if an institution were to pay interest only once a year.<\/p>\n<p>The\u00a0\u2018effective annual yield\u2019\u00a0(or EAR) represents the actual rate of return, reflecting all of the compounding periods during the year.<\/p>\n<p><strong>Effective annual rate (EAR) = (1 + Periodic interest rate) m\u00a0\u2013 1<\/strong><\/p>\n<p>Where,<\/p>\n<p>m = number of compounding periods in one year<\/p>\n<p>Periodic interest rate = (stated interest rate) \/ m<\/p>\n<p>&nbsp;<\/p>\n<div class=\"apply\">\n<h3>Apply for Wealth Manager Certification Now!!<\/h3>\n<p><a href=\"http:\/\/www.vskills.in\/certification\/Certified-Wealth-Manager\">http:\/\/www.vskills.in\/certification\/Certified-Wealth-Manager<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Certify and Increase Opportunity. Be Govt. Certified Wealth Manager Compounding The Time Value of Money The principle of time value of money is the notion that the sooner a given amount of money is received the more valuable it is, due to its capacity to earn interest. Central to the time value principle is the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[4,59],"tags":[2111,7,4977],"class_list":["post-19909","page","type-page","status-publish","hentry","category-accounting-banking-finance","category-wealth-manager","tag-compounding-techniques","tag-finance","tag-wealth-management"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Wealth Management | Investment mathematics - Compounding<\/title>\n<meta name=\"description\" content=\"The principle of time value of money is the notion that a given sum of money is more valuable the sooner it is received, due to its capacity to earn\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.vskills.in\/certification\/tutorial\/wealth-management-compounding\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Wealth Management | Investment mathematics - 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