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# Present and future values

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(Present and future values) Assume that you are starting with an investment of \$10,000.

a. What is the future value of the investment after one year if it earns 10% per year? What is the present value of this future value discounted at 10%?

b. What is the future value of the investment after one year if it earns 20% per year? What is the present value of this future value discounted at 10%?

c. What is the future value of the investment after one year if it earns 10% per year? What is the present value of this future value discounted at 20%?

#### Solution Preview

Present Value & Future Value 2

(Present and future values) Assume that you are starting with an investment of \$10,000.

Future Value= Present Value x (1+ interest rate ) ^ time
Present Value = Future Value / (1+ discount rate ) ^ time

a. What is the future value of the investment after one year if it earns 10% per year? What is the present value of this future value discounted at 10%?

Investment= \$10,000
annual interest ...

#### Solution Summary

Determines present value and future value.

\$2.49