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Time value of money

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 $11,200
Time (years) 10
Interest 4%
Compounded semiannually
Present value $ ____________________
Interest earned $ ____________________

Amount needed $18,640
Time (years) 7
Interest 6%
Compounded quarterly
Present value $ ________________
Interest earned $ ________________

Amount needed $18,948
Time (years) 12
Interest 6%
Compounded quarterly
Present value $ ______________
Interest earned $ ______________

In 6 years, Mrs. Folkers may pay off a note with a face value of $14,000, and interest of 10% per year, compounded semiannually. Find the future value of the note. Then find the amount that the holder of the note should accept as a complete payment today if money can be invested at 8% 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? $ _____

Find the present value and the amount of interest earned.
Amount needed $12,700
Time (years) 6
Interest 8%
Compounded annually
Present value $ _____________
Interest earned $ _____________

A company recently expanded their assemble operations at a cost of $490,000. Management expects that the investment will grow at a rate of 14% 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.
What is the future value of the investment? $ ____________________
What is the present value of that future value? $ __________________

Mr. Jordan wants all of his grandchildren to go to college and decides to help financially. How much must he give to each child a birth if they are to have $16,917 at entering college 18 years later, assuming 5% interest compounded annually?
How much should he give each child at birth? $ ______________

Solution Summary

The solution explains various questions relating to time value of money

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