Running head: INVESTMENT PAYBACK CALCULATIONInvestment Payback CalculationName:Institutional affiliation1INVESTMENT PAYBACK CALCULATION2Question 1The interest rate can either be simple or compounded. The basis for the simple interestrate is the deposit or loan principal amount. On the other hand, compound interest considers boththe principal amount as well as the interest rate accumulated on loan through each period. Thedetermination of the simple interest rate is more straightforward compared to compound interestsince the calculation of the former is based on the principal amount only. The received or paidsimple interest in a given period refers to the fixed principal amount percentage lent or borrowed.In addition to accruing, the lender adds the compound interest to the accumulated interest fromthe previous periods.Question 2FV = PV (1 + I) = \$10,000 (1+0.16)1= \$11,600Semiannual periods of compounding;FV = PV (1 + I) I = (16/2) = 8%N=2FV = 10,000 (1+0.08)2= \$11, 664INVESTMENT PAYBACK CALCULATIONQuarterly periods of compounding;I = (16/4) = 4%N=4FV = 10,000 (1+0.04)4= \$11,698. 59Question 3There is a reciprocal relationship between the present value and future value factors.PVIF is applicable in the estimation of the current worth of a given amount that a person or anorganization can receive in the future. FVIF helps in the calculation of the cash flows futurevalues that a firm or an individual should pay at a specific peri ...

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