Directions: Use time value of money (TVM) techniques to solve the following prob

Question

Directions: Use time value of money (TVM) techniques to solve the following problems. In order to help with your understanding of these problems, you must show your calculator problem set up (PV, FV, I/Y, N, PMT) and identify for which variable you are solving to receive credit consideration. For example: Starting with $10,000 how much will you have in 10 years if you earn 15 percent on your money? If you earn 8 percent how much will you have? To establish a good habit, always think about entering the period rate (i/m) and number of compounding periods (n*m) for Land N, This way when you have compounding that is not ANNUALLY, you have accounted for the difference. Remember m-the number of compounding intervals per year; so annual compounding m=1. PV=-10,000 N=n*m=10*1-10 I=i/m=15/1= PMT 0 FV=CPT=$40,455.58

Explanation / Answer

5 PV= 175000 FV=250000 N=15*1=15 To find annual i Using the Formula for compound interest, FV=PV*(1+i)^n 280000=175000*(1+i)^15 Solving for i ,in an online equatin solver, we get i= 0.3183    ie. 3.183% 6 FV=25000*(1+0.06)^15 = 59913.95 We will have only 59913.95 ie. (75000-59913.95)=   15086.05 Shortfall if 25000 is invested @ 6% for 15 yrs. 7 FV=25000*(1+0.08)^15 = 79304.23 Yes .It will be sufficient and more by (79304.23-75000)=   4304.23 if 25000 is invested @ 8% for 15 yrs. 8 PV= 34000; compounded @ 4%/yr. for 3 Years. To find FV FV= 34000*(1+0.04)^3= 38245.38 9 PV= 120000; compounded @ 5%/yr. for 7 Years. To find FV 7 years from now FV= 120000*(1+0.05)^7= 168852.05

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