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Financial Management



                      Notes         11.  The XYZ company is establishing a sinking fund to retire   5,00,000 8% debentures 10
                                         years from today. The company plans to put a fixed amount into the fund each year for 10
                                         years. The first payment will be made at the end of current year. The company anticipates
                                         that the fund  will earn  6% a  year. What  equal annual  contributions must be made to
                                         accumulate   5,00,000, 10 years from now.

                                    12.  Calculate the price of 10% debentures having face value of   100, to be redeemed after 10
                                         years at  par and  paying interest  after every  six months,  assuming the market rate of
                                         interest of debentures of similar risk and maturity period is (a) 10%, (b) 12%, (c) 8%
                                    Answers: Self Assessment
                                    1.   interest                       2.    accumulated interest
                                    3.   compounding                    4.    compounding

                                    5.    discounting                   6.    smaller
                                    7.   Annuity                        8.    present value
                                    9.   future value                   10.   perpetuity

                                    11.  rate of interest               12.   present value
                                    13.  gr = Vo(1 + r)n = Vn           14.   interest
                                    15.  Doubling

                                    2.9 Further Readings




                                     Books      Dr Pradeep Kumar Sinha, Financial Management, New Delhi, Excel Books, 2009.
                                                Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
                                                New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.
                                                Chandra, P., Financial Management—Theory and Practice, New Delhi, Tata McGraw
                                                Hill Publishing Company Ltd., 2002, p. 3.
































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