Find the present value and the amount of interest earned. Use the present value of a dollar table.
Round to the nearest cent as needed.
Amount needed $12,900
Time (years) 6
Present value $ ____________
Interest earned $____________
Amount needed $11,500
Time (years) 9
Present Value $________________
Interest Earned $________________
Amount needed $18,924
Time (years) 12
Present Value $ __________________
Interest earned $__________________
Amount needed $18,979
Time (years) 12
Present Value $ ____________
Interest Earned $_____________
Mr. Jordan wants all of his grandchildren to go to college and decides to help financially. How much must he give to each child at birth if they are to have $11,045 on entering college 18 years later, assuming 10% interest compounded annually? (round to the nearest cent)
A company recently expanded their assembly operations at a cost of $420,000. Management expects that the investment will grow at a rate of 12% per year compounded annually for the next 5 years. Find the future value of the investment. Then find the present value of that amount at a rate of 8% per year compounded annually.
Future value $ ____________ Present value $ __________________
In 6 year, Mrs. Folkers must pay off a note with a face value of $11,000, and interest of 8% per year, compounded semiannually. Find the future value of the note. Then find the that the holder of the note should accept as complete payment today if money can be invested at 4% per year, compounded quarterly. (round to the nearest cent)
What is the maturity value of the note?
How much money should the holder of the note accept as complete payment today?
The solution deals with variables (future value, present value) under the time value of money concept.