Determine the answers to each of the following independent situations: a. The fu
ID: 2456134 • Letter: D
Question
Determine the answers to each of the following independent situations:
a. The future value in two years of $2,000 deposited today in a savings account with interest compounded annual at 6 percent.
b. The present value of $8,000 to be received in four years, discounted at 12 percent.
c. The present value of an annuity of $2,000 per year for five years discounted at 14 percent.
d. An initial investment of $32,010 is to be returned in eight equal annual payments. Determine the amount of each payment if the interest rate is 12 percent.
e. A proposed investment will provide cash flows of $20,000, $8,000, and $6,000 at the end of Years 1, 2, and 3, respectively. Using a discount rate of 20 percent, determine the present value of these cash flows.
f. Find the present value of an investment that will pay $5,000 at the end of Years 10, 11, and 12. Use a discount rate of 14 percent.
Explanation / Answer
Answer
a. The future value in two years of $2,000 deposited today in a savings account with interest compounded annual at 6 percent
PV = FV/(1+i)^n
PV = $2,000
i = 6%
n = 2
FV= $2,247.20
b. The present value of $8,000 to be received in four years, discounted at 12 percent.
. The present value of an annuity of $2,000 per year for five years discounted at 14 percent.
PV = 2,000*2.9137 = $5,827.40
d. An initial investment of $32,010 is to be returned in eight equal annual payments. Determine the amount of each payment if the interest rate is 12 percent
e. A proposed investment will provide cash flows of $20,000, $8,000, and $6,000 at the end of Years 1, 2, and 3, respectively. Using a discount rate of 20 percent, determine the present value of these cash flows
F Find the present value of an investment that will pay $5,000 at the end of Years 10, 11, and 12. Use a discount rate of 14 percent.
FV Discounted rate 12% Present value A B A*B 8,000.00 0.635518 5,084.14Related Questions
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