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

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    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.