Present and Future Values for Different Interest Rates
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Use equations and a financial calculator to find the following values. See the hint for problems 2-1
a. An initial 500 compounded for 10years at 6 percent
b. An initial 500 compounded for 10 years at 12 percent
c. The present value of $500 due in 10 years at a 6 percent discount rate.
d. The present value of $1,552.90 due in 10 years at a 12 percent discount rate and at a 6 percent trate. Give a verbal definition of the term present cvalue and illustrate it using a time line with data from this problem. As a part of your answer, explain why present values are dependent upon interest rates.
PV=Future Value / (1+discount rate)^number of years
PV=1552.90/(1+12%)^10=500
Please show your formula and answer, Thanks
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The expert examines the present and future values for different interest rates.
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a. An initial 500 compounded for 10years at 6 percent
= 500 * (1 + 0.06)^10
= 895.42
b. An initial 500 compounded for 10 years at 12 percent
= 500 * (1 + 0.12)^10
= 1,552.92
c. The present ...
Purchase this Solution
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