What is the value in year 4 of a $630 cash flow made in year 8 if interest rates

Question

What is the value in year 4 of a $630 cash flow made in year 8 if interest rates are 8 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value in year 4 What annual rate of return is earned on a $5,000 investment when it grows to $11,500 in six years? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Annual rate of return How many years(and months) will it take $2 million to grow to $5.20 million with an annual interest rate of 8 percent? (Do not round intermediate calculations. Round "months" to 1 decimal place.) Period years months

Explanation / Answer

1,We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

630=P*(1.08)^4

P=630/1.08^4

=630*0.735029852

=$463.07(Approx).

2.

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

11500=5000*(1+r/100)^6

(11500/5000)^(1/6)=(1+r/100)

(1+r/100)=1.1489

r=(1.1489-1)*100

=14.89%(Approx).

3.

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

5.2=2*(1.08)^n

(5.2/2)=(1.08)^n

2.6=(1.08)^n

Taking log on both sides;

log 2.6=n*log(1.08)

n=log 2.6/log(1.08)

=12.41552129 years

=12 years(0.41552129*12)months

=12 years 5 months.

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