(PLEASE SHOW ALL WORK AND VALUES) (PLEASE SHOW ALL WORK AND VALUES) 15) Which of
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(PLEASE SHOW ALL WORK AND VALUES)
(PLEASE SHOW ALL WORK AND VALUES)
15) Which of the following will result in a future value of greater than $100? a) b) c) d) PV-$50, r-an annual interest rate of 10%, and n 8 years. PV-$75, r-an annual interest rate of 12%, and n-3 years. PV-$90, r-an annual interest rate of 14%, and n-1 years. All the future values are greater than $100 16) A home improvement firm has quoted a price of $9800 to fix up John's backyard. Five years ago John put $7500 into a home improvement account that has earned an average of 5.25% per year. Does John have enough money in his account to pay for the backyard fix-up? a) Yes. John now has exactly S9800 in his home improvement account. b) No. John has only $9687 in his home improvement account. c) Yes. John now has S10519 in his home improvement account. There is not enough information to answer this question. 17) You have purchased a savings bond that will pay $10,000 to your newborn child in fifteen years. If the bank discounts this bond at a rate of 3.875% per year, what is today's price (the present value) for this bond? a) $8417 b) $8500 c) $5654 d) $10000 18) To determine the present value of a future amount, one should the future cash flows. a) Annuitize b) Compound c) Discount d) MultiplyExplanation / Answer
15 a b c PV $50 $75 $90 r 10% 12% 14% n 8 yrs 3 yrs 1 yr Using the FV function in excel we can calculate the future value $107.18 $105.37 $102.60 FV(10%,8,,-50) FV(12%,3,,-75) FV(14%,1,,-90) Therefore, the correct option is (d), All the future values are greater than $ 100 16 7500*(1.0525)^5 9686.6094 No, John has accumulated only 9687 in his home improvement account 17 Using the PV function in excel we get the price of bond $5,653.72 PV(3.875%,15,,-10000) Therefore, the correct option is c), $ 5654 18 To Determine present value of a future amount, one should discount the future cash flows Annuitize, compound and multiply can be used to calculate future amount
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