# Time value of money

Please assist with the following homework:

1.Calculate the future value of the following

a, $500 invested for 5 yrs at a 5 % interest rate

b. $700 invested for 3 years at a 2 % interest rate

c. $1200 if invested for 7 years at an 11 % interest rate

d. $400 if invested for 10 years with an 0 % interest rate

CALCULATE THE PRESENT VALUE OF THE FOLLOWING

a. $2400 to be received 3 years from now with a 4% discount rate

b. $900 to be received 5 years from now with a 10% interest rate

c. $1100 to be received 2 years from now with a 24% interest rate

d. $45,000 to be received 8 years from now with a 7 % interest rate

e. Suppose you to are receive a stream of annual payments(also called annuity) of $7000 every year for 3 years starting this year. The discount rate is 6 % .What is the present value of these payments

f. Suppose you are to receive a payment of $4000 every year for 3 years.You are depositing these payments in a bank account that pays 3 % interest.Given these 3 payments and this interest rate, how much will be in your account in 3 years.

#### Solution Preview

1.Calculate the future value of the following

a, $500 invested for 5 yrs at a 5 % interest rate

FV = PV (1+i)n where PV is the present value

FV is the future value

i is the interest rate

n is the period

FV = 500(1 + 0.05)5

= 638.14

b. $700 invested for 3 years at a 2 % interest rate

FV = 700(1 + 0.02)2

= 742.85

c. $1200 if invested for 7 years at an 11 % interest rate

FV = 1,200(1 + 0.11)7

= 2,491.39

d. $400 if invested for 10 years with an 0 % interest rate

FV = 400(1 + 0.0)10

= 400

CALCULATE ...

#### Solution Summary

This solution is comprised of a detailed explanation to calculate the future value and present value for the given amount.