A. increases, the present value of any future cash flow increases. B. decreases,

Question

A.

increases, the present value of any future cash flow increases.

B. decreases, the present value of the future cash flow does not change.

C. decreases, the present value of any future cash flow increases.

D. increases, the present value of any future cash flow does not change.

2. Celesta Frank wants to go on a cruise in three years. She could earn 8.2 percent compounded monthly in an account if she were to deposit the money today. She needs to have $10,000 in three years. How much will she have to deposit today? (Round to the nearest dollar.)

a. $7,826

b. $6,432

c. $8,148

d.

$7,763

A.

increases, the present value of any future cash flow increases.

Explanation / Answer

C. decreases, the present value of any future cash flow increases.

2

a. $7,826 Annual interest 8.20% Monthly Interest 0.68% Let Money deposited be 100 Time in Months Opening Balance Interest Closing Balance                                                                           1.00                  100.00                              0.68                    100.68                                                                           2.00                  100.68                              0.69                    101.37                                                                           3.00                  101.37                              0.69                    102.06                                                                           4.00                  102.06                              0.70                    102.76                                                                           5.00                  102.76                              0.70                    103.46                                                                           6.00                  103.46                              0.71                    104.17                                                                           7.00                  104.17                              0.71                    104.88                                                                           8.00                  104.88                              0.72                    105.60                                                                           9.00                  105.60                              0.72                    106.32                                                                         10.00                  106.32                              0.73                    107.05                                                                         11.00                  107.05                              0.73                    107.78                                                                         12.00                  107.78                              0.74                    108.52                                                                         13.00                  108.52                              0.74                    109.26                                                                         14.00                  109.26                              0.75                    110.00                                                                         15.00                  110.00                              0.75                    110.76                                                                         16.00                  110.76                              0.76                    111.51                                                                         17.00                  111.51                              0.76                    112.27                                                                         18.00                  112.27                              0.77                    113.04                                                                         19.00                  113.04                              0.77                    113.81                                                                         20.00                  113.81                              0.78                    114.59                                                                         21.00                  114.59                              0.78                    115.37                                                                         22.00                  115.37                              0.79                    116.16                                                                         23.00                  116.16                              0.79                    116.96                                                                         24.00                  116.96                              0.80                    117.76                                                                         25.00                  117.76                              0.80                    118.56                                                                         26.00                  118.56                              0.81                    119.37                                                                         27.00                  119.37                              0.82                    120.19                                                                         28.00                  120.19                              0.82                    121.01                                                                         29.00                  121.01                              0.83                    121.83                                                                         30.00                  121.83                              0.83                    122.67                                                                         31.00                  122.67                              0.84                    123.51                                                                         32.00                  123.51                              0.84                    124.35                                                                         33.00                  124.35                              0.85                    125.20                                                                         34.00                  125.20                              0.86                    126.05                                                                         35.00                  126.05                              0.86                    126.92                                                                         36.00                  126.92                              0.87                    127.78 Rs 100 goes to $127.78 in 3 Years at 8.2% compounded monthly Now we have 127.78 if we deposit 100 So to get 10,000we have to deposit = 10,000/127.78 *100 = $7,825.95

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