Problem
Answer the following questions using the following formulas:
Time Value of Money-Simple Interest
Future Value=Present Value x (1 + Interest Rate)
Compounding to Determine Future Value
Future Value = Present Value x [(1 + Interest Rate) x (1 + Interest Rate) x ....)]
Discounting to Determine Present Value
Present Value = Future Value x {[1/(1 + Interest Rate)] x [1/(1 + Interest Rate)]}
• You have been given $2,000.00 to save or invest for one year at an interest rate of 8.00%. What will be the value of your savings after one year?
• You are planning to save for college tuition for a child. You plan to invest $3,000.00 for two years and a bank will pay you compound interest of 7% per year. What will be the value after two years?
• A bank agrees to pay you $2,500.00 after two years when interest rates are compounding at 7% per year. What is the present value of the payment?
• You plan to invest $1,000 now for two years and a bank will pay you compound interest of 7% per year. What will be the value after two years?
• A bank agrees to pay you $2,000 after three years when interest rates are compounding at 10% per year. What is the present value of this payment?
The response should include a reference list. Using one-inch margins, Times New Roman 12 pnt font, double-space and APA style of writing and citations.