5. (Computation of Future Values and Present Values) Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.)
a. What is the future value of $7,000 at the end of 5 periods at 8% compounded interest?
b. What is the present value of $7,000 due 8 periods hence, discounted at 11%?
c. What is the future value of 15 periodic payments of $7,000 each made at the end of each period and compounded at 10%?
d. What is the present value of $7,000 to be received at the end of each of 20 periods, discounted at 5% compound interest?
The solution calculates future and present values using Excel worksheet functions.
I have attached a format to use for the following questions. I need help, because for some of these I have been searching online for a calculator that can help me an I need help with these and others.
The week 2 word document are the questions and the excel document is the template the have to go in.
1.Present Values. Compute the present value of a $100 cash flow for the following combinations of discount rates and times:
a. r = 8 percent. t = 10 years.
b. r = 8 percent. t = 20 years.
c. r = 4 percent. t = 10 years.
d. 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
10. Number of Periods. How long will it take for $400 to grow to $1,000 at the interest rate specified?
a. 4 percent
b. 8 percent
c. 16 percent
20. Present Values. A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a $14 million 5-year contract providing $4 million now and $2 million a year for 5 years. Who is better paid? The interest rate is 10 percent.
22. Annuity Values.
a. What is the present value of a 3-year annuity of $100 if the discount rate is 6 percent?
b. What is the present value of the annuity in (a) if you have to wait 2 years instead of 1 year for the payment stream to start?
37. Amortizing Loan. Consider a 4-year amortizing loan. You borrow $1,000 initially, and repay it in four equal annual year-end payments.
a. If the interest rate is 8 percent, show that the annual payment is $301.92.
b. Fill in the following table, which shows how much of each payment is interest versus
principal repayment (that is, amortization), and the outstanding balance on the loan at each
Loan Year-End Interest Year-End Amortization
Time Balance Due on Balance Payment of Loan
0 $1,000 $80 $301.92 $221.92
1 --- --- 301.92 ---
2 --- --- 301.92 ---
3 --- --- 301.92 ---
4 0 0 - -
c. Show that the loan balance after 1 year is equal to the year-end payment of $301.92 times the 3-year annuity factor.
39. Annuity Value. The $40 million lottery payment that you just won actually pays $2 million per year for 20 years. If the discount rate is 8 percent, and the first payment comes in 1 year, what is the present value of the winnings? What if the first payment comes immediately?
59. Retirement Savings. You believe you will need to have saved $500,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 6 percent per year, how much must you save each year to meet your retirement goal?