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    Calculating present and future values

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    1.
    FOR EACH OF THE CASES SHOWN IN THE TABLE BELOW, CALCULATE THE FUTURE VALUE OF THE SINGLE CASH FLOW DEPOSITED TODAY THAT WILL BE AVAILABLE AT THE END OF THE DEPOSIT PERIOD IF THE INTEREST IS COMPOUNDED ANNUALLY, SEMI ANNUALLY AND QUARTERLY AT THE RATE SPECIFIED OVER THE GIVEN PERIOD.

    CASE SINGLE CASH FLOW INTEREST RATE DEPOSIT PERIOD (YEARS) SEMI ANNUAL ANNUAL QUARTERLY
    A $750 8% 10
    B $3,250 12% 5
    C $9,500 16% 2
    D $10,000 20% 4

    2. WHAT SINGLE INVESTMENT MADE TODAY, EARNING 14% ANNUAL INTEREST WILL BE WORTH $9,000 AT THE END OF 7 YEARS?

    3.WHAT IS THE PRESENT VALUE OF $7,000 TO BE RECEIVED AT THE END OF 5 YEARS IF THE DISCOUNT RATE IS 11%?

    4.WHAT IS THE MOST YOU WOULD PAY TODAY FOR A PROMISE TO REPAY YOU $3,000 AT THE END OF 5 YEARS IF YOUR OPPORTUNITY COST IS 9%?

    © BrainMass Inc. brainmass.com April 3, 2020, 9:25 pm ad1c9bdddf
    https://brainmass.com/business/discounted-cash-flows-model/calculating-present-and-future-values-378972

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

    Case A
    Annual Compounding
    PV= $750
    Rate=i=8%
    Number of periods=n=10
    FV=?
    FV=PV*(1+i)^n=$1,619
    or Use FV function in MS Excel as under
    FV= ($1,619)

    Semi annual Compounding
    PV= $750
    Rate=i=8%/2=4% per semi annual
    Number of periods=n=10*2 20 Semi annuals
    FV= ?
    FV=PV*(1+i)^n=$1,643
    or Use FV function in MS Excel as under
    FV=($1,643)

    Quarterly Compounding
    PV= $750
    Rate=i=8%/4=2% per semi annual
    Number of periods=n=10*4 40 Quarters
    FV= ?
    FV=PV*(1+i)^n=$1,656
    or Use FV function in MS Excel as under
    FV=($1,656)

    Case B
    Annual Compounding
    PV= $3,250
    Rate=i=12%
    Number of periods=n=5
    FV=?
    FV=PV*(1+i)^n=$5,728
    or Use FV function in MS Excel as under
    FV= ($5,728)

    Semi annual ...

    Solution Summary

    Solutions to given problems explains the methodology to find present/future values in the given cases.

    $2.19

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