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Calculate the present value of $100,000 in the given cases

Using the present value function in MS Excel, verify that the present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Calculate the present value of $100,000 for each of the following items (parts a-f) using these facts:

a. Interest is compounded semiannually
b. Interest is compounded quarterly
c. A discount rate of 12% is used
d. A discount rate of 20% is used
e. The cash will be received in three years
f. The cash will be received in seven years

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Solution Preview

Please refer attached file for better clarity of functions in MS Excel.

Future Value=FV=100,000
Number of periods=NPER= 5
Interest Rate=RATE=16%
Periodic Payment=PMT=0
Type of payment=0
PV can be found by using PV function in MS Excel.
PV= $47,611 =-PV(D8,D7,D9,D6,D10)
Ignoring rounding off errors , we received the same value as given.

a. Interest is compounded semiannually
Future Value=FV=100,000
Number of periods=NPER=5*2=10
Interest ...

Solution Summary

This solution describes the steps to calculate the present values in the given cases, using Excel calculations.

$2.19