Problem 5-10 Present and future values for different interest rates Find the fol

Question

Problem 5-10 Present and future values for different interest rates Find the following values. Compounding/discounting occurs annually. Round your answers to the nearest cent. a. An initial $800 compounded for 10 years at 3%. b. An initial $800 compounded for 10 years at 6%. C. The present value of $800 due in 10 year at a discount rate of 3%. d. The present value of $2,385 due in 10 years at 6%. e. The present value of $2,385 due in 10 years at 3%. f. Define present value I. The present value is the value today of a sum of money to be received in the future and in general is less than the future value. II. The present value is the value today of a sum of money to be received in the future and in general is greater than the future valu III. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value. IV. The present value is the value in the future of a sum of money to be received today and in general is less than the future value. V. The present value is the value in the future of a sum of money to be received today and in general is greater than the future valu -Select- g. How are present values affected by interest rates? Select- Select- Assuming positive interest rates, the present value will increase as the interest rate increases Assuming positive interest rates, the present value will decrease as the interest rate increases Assuming positive interest rates, the present value will decrease as the interest rate decreases Assuming positive interest rates, the present value will not change as the interest rate increases. Assuming positive interest rates, the present value will not change as the interest rate decreases.

Explanation / Answer

1. a) PV = 800
Time = 10 years
Rate = 3%

FV = PV*(1+r)n = 800*(1+3%%)10  = 1075.13



b) PV = 800

Time = 10 years
Rate = 6%

FV = PV*(1+r)n = 800*(1+6%)10 = 1432.68

c)

FV = 800
Time = 10 years
Rate = 3%

FV = PV*(1+r)n = PV*(1+3%)10 =800
PV = 595.28

d)

FV = 800
Time = 10 years
Rate = 6%

FV = PV*(1+r)n = PV*(1+6%)10 =800
PV = 446.72

Max 4 subparts can be solved as per chegg policy

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