3a. If we will receive $1,000 each year for 5 years, what would we invest today
ID: 2498387 • Letter: 3
Question
3a. If we will receive $1,000 each year for 5 years, what would we invest today using 10% discount?
Annual Payment 1,000
Interest Rate 10%
# of Years 5
3b. If we will receive $100,000 in 1 year, what would we invest today using 10% discount?
Future Value 100,000
Interest Rate 10%
# of Years 1
3c. If we put away $1,000 each year, what will it be worth at the end of year 1 at 10%?
Annual Savings 1,000
Annual Interest Rate 10%
# of Years 1
3d. If we will receive $100,000 in 8 year, what would we invest today using 10% discount?
Future Value 100,000
Interest Rate 10%
# of Years 8
Explanation / Answer
1)
Compute the present value of cash flows using excel function.
PV = PV(0.10,5,-1000,0) = $3,790.79.
Therefore,the investment should be made is $3,790.79.
2)
Compute the present value by using the excel funtion.
PV(0.10,1,0,-100000) = $90,909.09.
Thereore, the investment should be $90,909.09.
3)
Compute the future value by using the excel funtion.
FV(0.10,1,-1000,0) = $1000
Thereore, the future value should be $$1000.
4)
Compute the present value by using the excel funtion.
PV(0.10,8,0,-100000) = $46,650.74.
Thereore, the investment should be $46,650.74.
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