**Present and Future Value Problems** If you have $1,000 dollars and put it into

Question

**Present and Future Value Problems**

If you have $1,000 dollars and put it into a 12-month Certificate of Deposit (CD) paying 4.00% interest at term (maturity), how much will you have at maturity - assuming no other changes to the account?

If you have $1,000 dollars and put it into a 36-month (CD) paying 4.00% interest annually (compounding annually), how much will you have at maturity - assuming no other changes to the account?

If you need $2,000 dollars in 12 months to buy your best buddy a new set of golf club and the bank is offering 4.00% interest rate on a 12-month CD compounding annually, how much will you have to deposit today to have exactly $2,000 in 1 year - assuming no other changes to the account?

If you need $20,000 dollars in 48 months to buy your mom a new car for putting you through college, and the bank is offering 4.00% interest rate on a 4-year CD compounding annually, how much will you have to deposit today to have exactly $20,000 in 4 year - assuming no other changes to the account?

Please show your work.

Explanation / Answer

a. futute value = 1.04 * 1000 = 1040

b. future value = 1000* 1.04^3 = 1,124.86

c. Present value to deposit today = 2000/1.04 = 1,923.08

d. present value = 20,000/1.04^4 = 17,096.08

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