Marshall, McManus, & Viele text
Ch. 6, problem P6-26 a, b, c, and d only
Present value calculations. Using a present value table, your calculator, or a computer
program present value function, answer the following questions:
a. What is the present value of nine annual cash payments of $4,000, to be paid
at the end of each year using an interest rate of 6%?
b. What is the present value of $15,000 to be paid at the end of 20 years, using
an interest rate of 18%?
c. How much cash must be deposited in a savings account as a single amount
in order to accumulate $300,000 at the end of 12 years, assuming that the
account will earn 10% interest?
d. How much cash must be deposited in a savings account (as a single amount)
in order to accumulate $50,000 at the end of seven years, assuming that the
account will earn 12% interest?
This solution provides a detailed explanation on how to calculate the present value cash payments or deposits using present value factors.