Time Value of Money
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Calculate the future value of the following:
a. $49,298 if invested for five years at a 7% interest rate
b. $79,119 if invested for three years at a 4% interest rate
c. $69,124 if invested for seven years at an 2% interest rate
d. $39,929 if invested for ten years with a 0.9% interest rate
3) Calculate the present value of the following:
a. $105,126 to be received three years from now with a 4% Interest rate
b. $228,231 to be received five years from now with a 5% interest rate
c. $192,000 to received two years from now with a 12% interest rate
d. $998,111 to be received eight years from now with a 1% interest rate.
4) Suppose you are to receive a stream of annual payments (also called an "annuity") of $72,394 every year for three years starting this year. The interest rate is 4%. What is the present value of these three payments?
5) Suppose you are to receive a payment of $189,299 every year for three years. You are depositing these payments in a bank account that pays 2% interest. Given these three payments and this interest rate, how much will be in your bank account in three years?
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2) Calculate the future value of the following:
Future value = Amount invested x FVIF
FVIF= Future Value of $ 1 at the end of n periods
It can be read from tables or calculated using the following equation
FVIF( n, r%)= =(1+r%)^n
a. $49,298 if invested for five years at a 7% interest rate
n= 5 years
r= 7.00%
FVIF (5 periods, 7.% rate ) = 1.402552
Amount invested= $49,298.00
Therefore, future value= $69,143.01 = $49,298. x 1.402552
Answer: $69,143.01
b. $79,119 if invested for three years at a 4% interest rate
n= 3 years
r= 4.00%
FVIF (3 periods, 4.% rate ) = 1.124864
Amount invested= $79,119.00
Therefore, future value= $88,998.11 = $79,119. x 1.124864
Answer: $88,998.11
c. $69,124 if invested for seven years at an 2% interest rate
n= 7 years
r= 2.00%
FVIF (7 periods, 2.% rate ) = 1.148686
Amount ...
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