ework e Question 4 Check My Wo Click here to read the eBook: Future Values Click

Question

ework e Question 4 Check My Wo Click here to read the eBook: Future Values Click here to read the eBook: Present Values PRESENT AND FUTURE VALUES FOR DIFFERENT PERIODS Find the following values using the equations and then a financial calculator Compounding/discounting occurs annually. Do not round intermediate calculations Round your answers to the nearest cent. a. An initial $600 compounded for 1 year at 10%. b. An initial $600 compounded for 2 years at 10%. c. The present value of $600 due in 1 year at a discount rate of 10%. d. The present value of $600 due in 2 years at a discount rate of 10%. Check My Work Ore Icon Key

Explanation / Answer

Answer a.

Initial Deposit = $600
Period = 1 year
Interest Rate = 10%

Future Value = Initial Deposit * FV of $1 (i%, n)
Future Value = $600 * FV of $1 (10%, 1)
Future Value = $600 * 1.10
Future Value = $660

Answer b.

Initial Deposit = $600
Period = 2 years
Interest Rate = 10%

Future Value = Initial Deposit * FV of $1 (i%, n)
Future Value = $600 * FV of $1 (10%, 2)
Future Value = $600 * 1.21
Future Value = $726

Answer c.

Future Value = $600
Period = 1 year
Interest Rate = 10%

Present Value = Future Value * PV of $1 (i%, n)
Present Value = $600 * PV of $1 (10%, 1)
Present Value = $600 * 0.909
Present Value = $545.40

Answer d.

Future Value = $600
Period = 2 years
Interest Rate = 10%

Present Value = Future Value * PV of $1 (i%, n)
Present Value = $600 * PV of $1 (10%, 2)
Present Value = $600 * 0.826
Present Value = $495.60

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