Answer the following question:
Using either Excel or an online calculator, solve the following Present Value (PV) and Future Value (FV) problems. The questions are shown below for convenience
1. If a nurse deposits $25,000 today in a mutual fund that is expected to grow at an annual rate of 8%, what will be the value of the investment:
1. 3 years from now?
2. 6 years from now?
3. 9 years from now?
4. 12 years from now?
If the rate changed to 10%, what would be the value of the investment:
1. 3 years from now?
2. 6 years from now?
3. 9 years from now?
4. 12 years from now?
9. How do the values compare in 12 years with the different interest rates?
2. The chief financial officer of a home health agency needs to determine the present value of a $120,000 investment received at the end of year 5. What is the present value if the discount rate is:
1. 3%?
2. 6%?
3. 9%?
4. 12%?
What is the present value if the investment is received at the end of 7 years?
1. 3%?
2. 6%?
3. 9%?
4. 12%?
3. An obstetrician plans to invest $25,000 per year at the end of each year into a low-risk retirement account. She expects to earn 5% for 35 years. What will her retirement account be worth at the end of those 35 years assuming she invests $25,000 right away (rather than waiting until the end of the year)?