Find the future value one year from now of a $7,000 investment at a 3 percent annual compound interest rate. Also calculate the future value if the investment is made for two years.
FV one year
FV two years
Sum of FV's
Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent.
a. What would be the future value if the interest rate is a simple interest rate?
FV using simple interest
b. What would be the future value if the interest rate is a compound interest rate?
FV using compound interest
Find the present value of $7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present value if the $7,000 is received after two years.
PV received one year from now
PV received two years from now
Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent.
PV one year from now
PV two years from now
Use a financial calculator or computer software program to answer the following questions.
a. What is the present value of $359,000 that is to be received at the end of twenty-three years, the discount rate is 11 percent, and semiannual discounting occurs?
PV w/ semi-annual discounting
b. How would your answer for (a) change if monthly discounting were used?
PV w/ monthly discounting
This solution illustrates how to use Excel functions to find future and present values.