How do you calculate future and present value of an annuity with compounding interest?

Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.)

(a) What is the future value of $7,000 at the end of 5 periods at 8% compounded interest?
(b) What is the present value of $7,000 due 8 periods hence, discounted at 11%?
(c) What is the future value of 15 periodic payments of $7,000 each made at the end of each period and compounded at 10%?
(d) What is the present value of $7,000 to be received at the end of each of 20 periods, discounted at 5% compound interest?

Solution Preview

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Computation of Future values
Using the appropriate interest table, answer
each of the following questions. (Each case is independent of the others.)
(a) What is the future value of $7,000 at the end of 5 periods at 8% compounded interest?

FV = PV (1+i)n where PV is the present value
FV is the future value
i is the interest rate
n is the period

FV = 7,000(1 ...

Solution Summary

This solution shows the formulas and calculations for each scenario, formatted in an attached Word document.

Problem 1
If interest rates are 8 percent, what is the futurevalue of a $400 annuity payment over six years? Unless otherwise directed, assume annual compounding periods.
- Recalculate the futurevalue at 6 percent interest and 9 percent interest.
Problem 2
If interest rates are 5 percent, what is the presentvalue of a

13. The futurevalue of $200 received today and deposited for three years in an account which pays semiannual interest of 8 percent is ______.
A. $253.00
B. $252.00
C. $158.00
D. $134.66
14. The futurevalue of $100 received today and deposited at 6 percent for four years is
A. $126.
B. $ 79.
C. $124.
D. $116.
15-

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4) Wh

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presentvalue (of a future payment received )
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opportunity cost
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PERIODIC DEPOSIT $80 at the end of the month
RATE 7.5% compounded monthly
Time 40 years
find the value of annuity.
b. after 40 years you will have approximately$ ?
The interest is approximately $ ?
Find the interest ?
the formula required to use is A=P{(1+r)t-1
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