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Future Value Calculation and Annuities

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Your parents are planning to retire in 18 years. They currently have $250,000. They supplement those dollars with an annual payment into a retirement account of $20,000. What will be the value of all dollars if the funds can earn an interest rate of 5%? What will be the value of all dollars if the funds can earn an interest rate of 10%?

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Solution Summary

Compute the future value of a deposit and of an annuity.

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Finance/Accounting Problem1. Compute the present value of a $100 cash flow for the following combinations of discount rates and times: 2. Compute the future value of a $100 cash flow for the following combinations of discount rates and times:

1. Present Values. Compute the present value of a $100 cash flow for the following combinations of discount rates and times:
1. r = 8 percent. t = 10 years.
2. r = 8 percent. t = 20 years.
3. r = 4percent. t = 10 years.
4. r = 4 percent. t = 20 years.

2. Future Values. Compute the future value of a $100 cash flow for the same combinations of rates and times as in problem 1.

6. Calculating Interest Rate. Find the interest rate implied by the following combinations of present and future values:

Present Value Years Future Value
$400 11 $684
$183 4 $249
$300 7 $300

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