Present Value and Future Value The following situations require the application of the time value of money:

1. On January 1, 2010, $16,000 is deposited. Assuming an 8% interest rate, calculate the amount accumulated on January 1, 2015, if interest is compounded

(a) annually,

(b) semiannually, and

(c) quarterly.

2. Assume that a deposit made on January 1, 2010, earns 8% interest. The deposit plus interest accumulated to $20,000 on January 1, 2015. How much was invested on January 1, 2010, if interest was compounded

(a) annually,

(b) semiannually, and

(c) quarterly?

AppendixLO1