Submitted by: Submitted by rex21
Views: 139
Words: 311
Pages: 2
Category: Business and Industry
Date Submitted: 09/04/2013 07:33 PM
1What is the present value of:
a. $8,000 in 10 years at 6 percent?
b. $16,000 in 5 years at 12 percent?
c. $25,000 in 15 years at 8 percent?
d. $1,000 in 40 periods at 20 percent?
Solution:
Appendix B
PV = FV * PVIF
a. $ 8,000 * .558 = $4,464
b. $16,000 * .567 = $9,072
c. $25,000 * .315 = $7,875
d. $ 1,000 * .001 = $1
2
If you invest $12,000 today, how much will you have:
a. In 6 years at 7 percent?
b. In 15 years at 12 percent?
c. In 25 years at 10 percent?
d. In 25 years at 10 percent (compounded semiannually)?
Solution:
Appendix A
FV = PV * FVIF
a. $12,000 * 1.501 = $ 18,012
b. $12,000 * 5.474 = $ 65,688
c. $12,000 * 10.835 = $130,020
d. $12,000 * 11.467 = $137,604 (5%, 50 periods)
5
Mrs. Crawford will receive $6,500 a year for the next 14 years from her trust. Ifan 8 percent interest rate is applied, what is the current value of the future payments?
Solution:
Appendix D
PVA = A * PVIFA (8%, 14 periods)
= $6,500 * 8.244 = $53,586
3
How much would you have to invest today to receive:
a. $12,000 in 6 years at 12 percent? 12,000x.507=6,084
b. $15,000 in 15 years at 8 percent? 15,000x.315=4,725
c. $5,000 each year for 10 years at 8 percent? 5,000x6.710=33,550
d. $40,000 each year for 40 years at 5 percent? 40,000x17.159=686,360
FOR QUESTIONS A and B use the Formula:
PV = FV × PVIF
TO GET PVIF USE APPENDIX B IN YOUR BOOK
For questions C and D use the Formula:
PV = A (the annuity) × PVIFA
TO GET PVIFA USE APPENDIX D IN YOUR BOOK