1. Which is better, a present value of $100 or a future value of $100 ? Please e

Question

1. Which is better, a present value of $100 or a future value of $100 ? Please explain

2. Define and explain two factors that affect the present value of an asset.

3. In five years, what is the future value of $4,000 if the interest rate is 10% and money is compounded montly ? What is the future value if the money is compounded semiannually ?

4. Clark has an investment proposal that invites him to invest $1.000 a year for ten years in a hotel and promises to pay him a return of 11% per year. If Clark agrees, how much will his investment be worth at the end of ten years ?

5. What is the maximum amount of money you should pay for an investment today that is projected to yield $8,000 in four years if the market rate of interest is 12% and the money is compounded semiannually ? What would be the present value if the money is compounded monthly?

Explanation / Answer

1. Present value of $100 is better than future value of $100. Present value of $100 future value shall be Less than $100 because of time value such as Inflation, time,Risk etc.

2.Today's value for income to be received in the future.

Two factors affect the analysis:(1) the perceived risk that one mightreceive nothing at all in the future,or a smaller amount than expected,and (2) the potential income from alternative investmentsthat could be purchased if one were paid the present value for a future income stream.(Discounting is the mathematicalcalculation used to arrive at present value.)

3. The future value(Monthly Compound) is $6,575.13.

   The future value(Semiannualy Comound) is $6,511.33.

4.

5. Present Value=$5,019.30

FV (Future Value) $16,722.01 PV (Present Value) $5,889.23 N (Number of Periods) 10.000 I/Y (Interest Rate) 11.000 PMT (Periodic Payment) $1,000.00 Starting Investment $0.00 Total Principle $10,000.00 Total Interest $6,722.01

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