2. Find the present value of $2,000,000 20 years from now at interest rate of 6%

Question

2. Find the present value of $2,000,000 20 years from now at interest rate of 6%, 10%, 12%, 18%. 3. If you save $4,000 a year for 30 years, what is the future value of the savings after 30 years at interest rate of 2%, 4%, 10%, 12%. 4. You want to retire with a saving of $500,000 in 20 years. (i) (ii) (iii) Ifyou can earn 8% a year, how much do you have to save each year? If you can earn 10% a year, how much do you have to save each year? Ifyou can earn 12% a year, how much do you have to save each year?

Explanation / Answer

2

Present value of money:

6%

10%

12%

18%

3

Future value of money:

2%

4%

10%

12%

4

Each year annuity payment calculation:

8%

10%

12%

Present value of money: = FV/ (1+r) ^N Future value FV= $          20,00,000 Rate of interest r= 6% Number of years N= 20 Present value = 2000000/ (1+0.06)^20 = $      6,23,609.45

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