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    Time value of money

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    What will $1,130 amount to in 5 years at 5% interest?
    What is the present value of $10,000 due in 11 years time at 5% compound interest?
    The power cost of running a pump is $1,900 per year; determine the present value of this expenditure over 15 years at 6% interest.
    A machine is purchased for $50,000 and costs $30,000 per year in electrical and maintenance costs. The estimated life is 15 years and interest is at 6% compound. What is the total annual cost of this machine?
    A bank offers an annual interest rate of 10% compounded continuously for savings in excess of $1000 or more deposited for over 2 years. If $1642 is deposited on the first of January 1999 how much would this amount to in July 2001?
    If income from the sales of an item occurs continuously at the rate of $17,000 per year and is immediately deposited into an account that yields 12% per year, compounded continuously, how much would accumulate at the end of 3 years?

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    Solution Preview

    Please see the attachment.
    What will $1,130 amount to in 5 years at 5% interest?

    We have to find the future value of a single sum
    Using the compound interest formula
    FV = PV (1+rate)^n where
    PV = present value = $1,130
    Rate = 5%
    N = time period = 5 years
    FV = amount in 5 years = 1,130 (1+5%)^5 = $1,442.20

    What is the present value of $10,000 due in 11 years time at 5% compound interest?

    Here we are given the future value and we have to find the present value
    PV = FV/(1+rate)^n where
    FV = future value = 10,000
    Rate = 5%
    N = time period = 11 years
    PV = 10,000/(1+5%)^11 = $5,846.79

    The power cost of running a pump is $1,900 per year; determine the present value of this expenditure over 15 years at 6% interest. ...

    Solution Summary

    The solution explains some questions relating to time value of money

    $2.19