To determine the appropriate discount factor(s) using tables, click here to view

Question

To determine the appropriate discount factor(s) using tables, click here to view Tables I, II, III, or IV in the appendix. Alternatively, if you calculate the discount factor(s) using a formula, round to six (6) decimal places before using the factor in the problem. (Round your answers to the nearest dollar amount.)

The future value of $11,000 invested at 8 percent for 11 years.

The future value of eight annual payments of $1,400 at 7 percent interest.

The amount that must be deposited today (present value) at 8 percent to accumulate $65,000 in five years.

The annual payment on a 10-year, 9 percent, $40,000 note payable.

To determine the appropriate discount factor(s) using tables, click here to view Tables I, II, III, or IV in the appendix. Alternatively, if you calculate the discount factor(s) using a formula, round to six (6) decimal places before using the factor in the problem. (Round your answers to the nearest dollar amount.)

Explanation / Answer

Solution:

a) Principal Amount = $11,000, Rate = 8%, Period = 11Years

Future Value after 11 years = $11,000*1.851 (Refer Compound interest table, Single Payment) =$ 20,361

b) Annual Payments = $1,400 for 8 year (Considering end of year payments)

rate of interest = 7%

Future Value = $1400 * 10.25980 (Refer Future Annutity Table) = $14,364

c) Future Value = $65,000

Rate of Interest = 8%

Present Value = $65,000 * 0.6806 (Refer PV Table of compound interest) = $44239

d) Future value of Annuity = $40,000

Rate of Interest = 9%

Annual Payments = $40000/15.1929 (Refer Future Annutity Table) = $2,633

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