Time Value of Money: Basics Using Table 12A.1 and Table 12A.2 of this chapter, d

Question

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.) (a) The future value in two years of $3,000 deposited today in a savings account with interest compounded annually at 4 percent (b) The present value of $8,000 to be received in four years, discounted at 8 percent. $ 0 (c) The present value of an annuity of $3,000 per year for four years discounted at 16 percent $ 0 (d) An initial investment of $37,260 is to be returned in eight equal annual payments. Determine the amount of each payment fthe interest rate is 6 percent $ 0

Explanation / Answer

A- FUTURE VALUE = PV(1+R)^n = 3000(1.04)^2 = 3244.8

B PRESENT VALUE = FUTURE VALUE/ (1+R)^n = 8000/1.08^4 = 8000/1.3604 = 5880.23

C- PRESENT VALUE = 3000/(1.16)^1 + 3000/(1.16)^2 + 3000/(1.16)^3 + 3000/(1.16)^4 = 2586.2+ 2229.48+1921.97+1656.87 = 8393.72

D

e -

PRESENT VALUE FACTOR CASH FLOW 1/1.16^n present value of cash flow 50000 0.862069 43103.45 8000 0.7431629 5945.303 5000 0.6406577 3203.288

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