14) What is the present value of $11,463 to be received 7 years from today? Assu

Question

14) What is the present value of $11,463 to be received 7 years from today? Assume a discount rate of 3.5% compounded annually and round to the nearest $1. A) $5,790 B) $6,508 C) $7,210 D) $9,010

15) Biff deposited $9,000 in a bank account, and 10 years later he closes out the account, which is worth $18,000. What annual rate of interest has he earned over the 10 years? A) 6.45% B) 7.18% C) 9.10% D) 10.0%

16) Two sisters each open IRAs in 2011 and plan to invest $3,000 per year for the next 30 years. Mary makes her first deposit on January 1, 2011, and will make all future deposits on the first day of the year. Jane makes her first deposit on December 31, 2011, and will continue to make her annual deposits on the last day of each year. At the end of 30 years, the difference in the value of the IRAs (rounded to the nearest dollar), assuming an interest rate of 7% per year, will be A) $19,837. B) $12,456. C) $6,300. D) $210.

Explanation / Answer

per the rule, I can answer first question only.

We have:

FV = 11463

N = 7

R = 3.5%

We have following formula for PV:

PV = FV/ (1+r)^n

      = 11,463/ (1+0.035)^7

      = 11,463 / 1.2723

      = 9,010

Hence, option D is correct.

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