Future Value Issues Using the futurevalues tables , solve the following: 1. What

Question

Future Value Issues     Using the futurevalues tables , solve the following:

1.       What is the future valueon December 31, 2019 of 10 cash flows of $20,000 with the firstcash payment made on December 31, 2010 and interest at 10% beingcompounded annually?

2.       What is the future valueon June 30, 2020 of 20 cash flows of $15,000 with the first cashpayment made on December 31, 2010 and the annual interest rate of10%being compounded semiannually?

3.       What is the future valueon December 31, 2020 of 20 cash flows of $15,000 with the first caspayment made on December 31, 2010 and the annual interest ratebeing compounded semiannually?

Explanation / Answer

1. What is the future value on December 31, 2019 of 10cash flows of $20,000 with the first cash payment made on     December 31, 2010 and interest at 10% beingcompounded annually    ============================================================================= Future value = Annuity Amount x [(1 + r)n -1] / r
          r = interest rate
          n = number of periods
Using FV table we get 15.93742 for $1 annuity at 10% forn=10 =   $20,000 x15.93742   =   $318,748.40 If in the book you have 2.59374 i.e. equal to(1+r)n in annuity table then use the followingformula       = $20,000(2.59374 -1 )/0.1 = $20,000 x15.93742   =$318,748.40 2. What is the future value on June 30, 2020 of 20 cashflows of $15,000 with the first cash payment made on      December 31, 2010 and the annualinterest rate of 10% being compounded semiannually?
     ========================================================================       From future value annuitytable we get 33.066 for i = 5% and n = 20 periods

   FV20 =   $15,000 x33.066      =   $495,990 Other way with FV value = 2.6533 for 20 periods at 5%( 10%/2)       FV20   =   $15,000x (2.6533 - 1) / 0.05   =   $15,000 x33.066   =   $495,990 3. I didn't get interest rate ??

      3. I didn't get interest rate ??

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