his Question: 1 pt 14 of 21 (8 complete) ? | > | This Test: 21 pts possi Questio
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his Question: 1 pt 14 of 21 (8 complete) ? | > | This Test: 21 pts possi Question Help Ted Roberts has been offered the following future payments n years from today. If his opportunity cost is i compounded annually, what value would he place on each opportunity? Present Value (S) Interest Rate (%) 4 9 17 12 Future Years 14 30 26 18 Value ($) 9,600 5,200 5,000 3,600 Present Value ($) Future Value ($) 9,600 5,200 5,000 3,600 Interest Rate (%) Years 14 30 26 18 [ ] (Round to the nearest cent) Round to the nearest cent.) (Round to the nearest cent) [] (Round to the nearest cent) 9 17 12Explanation / Answer
Sloution:- a) Calculation of present values Present value=Future amount to be received/(1+i)^n Where i=perodic interest rate n= number of years Future value Interest rate Years Formula for PV Present value 9600 4% 14 =9600/(1+4%)^14 5543.76 5200 9% 30 =5200/(1+9%)^30 391.93 5000 17% 26 =5000/(1+17%)^26 84.36 3,600 12% 18 =3600/(1+12%)^18 468.14 b) Present value=Future amount to be received/(1+i)^n Where i=perodic interest rate n= number of peroids A B C D E=A*D F=C/A G=B/(1+F)^E No. of compounding in year FV Deposis Nominal interest rate Deposit peroids Number of peroids=deposit peroid*No of compounding Perodic interest rate=Nominal rate/no of compounding Formula to calculate PV Present value 1 800 19% 10 10 19% =800/(1+19%)^10 140.48 2 400 11% 17 34 5.50% =400/(1+5.50%)^34 64.79 12 500 4% 3 36 0.3333% =500/(1+0.3333%)^36 443.55 Please feel free to ask if you have any query in the comment section.
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