Calculate answers to the following scenarios using present value tables: a. If $

Question

Calculate answers to the following scenarios using present value tables:
a.       If $100 is deposited into an account paying 8 percent simple interest, what will be the value of the account in 5 years?
b.       If an accumulation of $8,000 is desired at the end of 4 years, what amount must be deposited now to accomplish that goal, assuming 12 percent interest compounded annually?
c.       What is the present value of $300 received at the end of each year for 4 years, assuming 9 percent interest compounded annually?
d.       What amount must be deposited at the bank today to grow to $10,000 in 5 years, assuming 14 percent interest compounded semiannually?

Explanation / Answer

1) Value of the account = 100+(100*8%*5)

= 140

2) Future value = Present value ( 1+R)^N

8000 = Present value ( 1+0.12)^4

8000/1.5735 = Present value

Amount to be deposited now = 5084.15

3) PV = 300*PVAF ( 9%,4 years)

= 300*3.2397 i.e 971.91

4) Future value = Present value *(1+R)^N

10000 = Present Value ( 1+0.14)^5

10000 = Present value *1.9254

Present value = 5193.69

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