Calculating present and future values
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13. The future value of $200 received today and deposited for three years in an account which pays semiannual interest of 8 percent is ______.
A. $253.00
B. $252.00
C. $158.00
D. $134.66
14. The future value of $100 received today and deposited at 6 percent for four years is
A. $126.
B. $ 79.
C. $124.
D. $116.
15-19. Calculate the present value of the annuity assuming that it is an ordinary annuity.
Case Amount of Annuity Interest Rate Period / Years
A $14,000 9% 3
B $17,500 13% 15
C $975 18% 7
D $1,127,000 4% 9
E $10,000 7% 3
20-24. For each of the cases shown below in the table, calculate the present value of the cash flow:
Case Single Cash Flow Interest Rate End of Periods / Years
A $13,000 10% 5
B $34,000 17% 25
C $16,000 6% 18
D $210,000 15% 15
E $90,000 20% 9
25-29 For each of the cases shown below in the table, calculate the future value of the cash flow:
Case Single Cash Flow Interest Rate End of Periods / Years
A $3,000 10% 7
B $44,000 12% 5
C $6,000 8% 10
D $27,000 16% 12
E $99,000 20% 6
Calculate the above future values in questions 25-29 as semi annual and quarterly compounding.
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Solution Summary
There are basic 17 problems related to time value of money concepts. Solutions depict the methodology to calculate Present and future values in different cases.
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Please refer attached file for better clarity of formulas.
13.
Present Value of deposit=PV=$200
Semi annual interest rate=i=8%/2=4%
Number of periods=n=3 years=6 (semi annual periods)
Future Value of deposit=PV*(1+i)^n=200*(1+4%)^6=253.06
Answer is A. $253
14.
Present Value of deposit=PV=$100
Annual interest rate=i=6%
Number of periods=n=4 years
Future Value of deposit=PV*(1+i)^n=100*(1+6%)^4=126.2477
Answer is A. $126
15-19.
Case A:
Amount of annuity=R=$14000
Interest rate=i=9%
Periods=n=3 years
Present Value of annuity=PV=R*(1-1/(1+i)^n)/i=14000*(1-1/(1+9%)^3)/9%=$35,438.13
Case B:
Amount of annuity=R=$17500
Interest rate=i=13%
Periods=n=15 years
Present Value of annuity=PV=R*(1-1/(1+i)^n)/i=17500*(1-1/(1+13%)^15)/13%=$113,091.63
Case C:
Amount of annuity=R=$975
Interest rate=i=18%
Periods=n=7 years
Present Value of annuity=PV=R*(1-1/(1+i)^n)/i=975*(1-1/(1+18%)^7)/18%=$3,716.24
Case D:
Amount of annuity=R=$1,127,000
Interest rate=i=4%
Periods=n=9 years
Present Value of annuity=PV=R*(1-1/(1+i)^n)/i=1127000*(1-1/(1+4%)^9)/4%=$8,379,618.7
Case ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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