A deposit of $790 earns interest rates of 8 percent in the first year and 11 per

Question

A deposit of $790 earns interest rates of 8 percent in the first year and 11 percent in the second year. What would be the second year future value? (Round your answer to 2 decimal places.) Future value Compute the present value of an $1,350 payment made in nine years when the discount rate is 11 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value Compute the present value of $800 paid in three years using the following discount rates: 7 percent in the first year, 8 percent in the second year, and 9 percent in the third year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value

Explanation / Answer

1.

Future value = 790 x (1+8%) x (1+11%) = $ 947.05

2.

Present value = Payment x ((1-(1+Rate)^-Years)/Rate

PV = PMT x ((1-(1+R)^-N)/R

PV = 1350 x ((1-(1+11%)^-9)/11%

PV = $7,475.01

3.

Present value = 800/((1+7%)*(1+8%)*(1+9%))

Present value = $635.12

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