Time Value of Money: Basics
Using Table 12A.1 and Table 12A.2 of this chapter, determine the answers to each of the following independent situations. (Round answers to the nearest whole number.)
Note: I know A and C, I just need help with B, D, E, and F.
(a) The future value in three years of $1,000 deposited today in a savings account with interest compounded annually at 8 percent.
$ 1,260
(b) The present value of $5,000 to be received in five years, discounted at 10 percent.
(c) The present value of an annuity of $9,000 per year for six years discounted at 10 percent.
$39,195
(d) An initial investment of $14,904 is to be returned in eight equal annual payments. Determine the amount of each payment if the interest rate is 12 percent.
(e) A proposed investment will provide cash flows of $50,000, $10,000, and $7,000 at the end of Years 1, 2, and 3, respectively. Using a discount rate of 20 percent, determine the present value of these cash flows.
Year 1 $Answer
Year 2 $Answer
Year 3 $Answer
(f) Find the present value of an investment that will pay $7,000 at the end of Years 10, 11, and 12. Use a discount rate of 12 percent.