a) What is the present worth on September 6th, 2013 of $10,000 on September 6th,

Question

a)

What is the present worth on September 6th, 2013 of $10,000 on September 6th, 2020 given an interest rate of 7%?

b)

How much would you need to deposit at 6% on January 1, 2017 in order to draw out $179.20 at the end of each year for 7 years, leaving nothing in the fund at the end?

c)

If $2,000 is invested now, $1,500 two years hence, and $1,000 four years hence, all at 6% interest, what will be the total amount ten years hence?

d)

from part c, what is this total equivalent to in today’s dollars?

Explanation / Answer

Present Value = P/(1+r) + P/(1+r)^2 + ............+P/(1+r)^7 = 10000/1.07 + 10000/1.07^2 +..............+ 10000/1.07^7

= $6,227.5

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