Present value for various discounting periods Find the present value of $700 due

Question

Present value for various discounting periods

Find the present value of $700 due in the future under each of these conditions:

14% nominal rate, monthly compounding, discounted back 1 year.

ou borrow $55,000; the annual loan payments are $3,180.66 for 30 years. What interest rate are you being charged?

Future value for various compounding periods

Find the amount to which $800 will grow under each of these conditions:

16% compounded monthly for 3 years. Round your answer to the nearest cent.
$??

16% compounded daily for 3 years. Round your answer to the nearest cent.
$??

Explanation / Answer

Calculation of Future value of $800 Invetsed today Case -1: 16% compounded monthly for 3 years. r= 16% /12 = 0.01333333 n = 3 years * 12 = 36 P = $800 Future value = P * (1+r)^n = 800*(1+0.013333)^36 = $                                                             1,288.75 Case -2: 16% compounded daily for 3 years. r= 16% /365 = 0.000438356 n = 3 years * 365 = 1095 P = $800 Future value = P * (1+r)^n = 800*(1+0.00043856)^(1095) = $                                                             1,293.01

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