1 Calculate the Future value of a single amount Future values As part of your financial planning, you wish to purchase a new car 7 years from today. The car you wish to purchase costs $16,000 today, and your research indicates that its price will increase by 4% per year over the next 7 years. Present Value Annual rate of interest Number of years Future value What is the price of the car at the end of 7 years? See slide 19 2 Calculate the Present value of a single amount Present value for the case shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. Future Value Annual rate of interest Number of years Present value Single cash flow $74,000 Discount rate 6% End of period (years) 4 For the case shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. See slide 32 3 Calculate the Future value of an ordinary annuity Future value of an annuity Using the values below, answer the questions that follow. Annual Annuity Payment Annual rate of interest Number of years Future value Amount of annuity $9,500 Interest rate 11% Deposit period (years) Calculate the future value of the annuity, assuming that it is An ordinary annuity See slide 44 4 Calculate the Present value of an ordinary annuity Amount of annuity $26.000 Interest rate 12% Period (years) 15 Annual Annuity Payment Annual rate of interest Number of years Present value Calculate the presert value of the annuity assuming that it is an ordinary annuity. 5 Calculate the Future value of an annuity due Future value of an annuity Using the values below, answer the questions that follow. Annual Annuity Payment Annual rate of interest Number of years Future value Amount of annuity $9,500 Interest rate 11% Deposit period (years) 6 See slide 54 Calculate the future value of the annuity, assuming that it is An annuity due Which is preferable, annuity or annuity due? 6 Calculate the Present value of an annuity due Amount of annuity $26.000 Interest rate 12% Period (years) 15 Annual Annuity Payment Annual rate of interest Number of years Present value Calculate the present value of the annuity assuming that it is an annuity due. See slide 59