4.

eBookP & F ValuesP & F ValuesP & F ValuesP & F ValuesP & F ValuesP & F Values

Present Value and Future Value

Jeffrey Inc. estimates that it will need $150,000 in 10 years to expand its manufacturing facilities. A bank has agreed to pay Jeffrey 4% interest compounded annually if the company deposits the entire amount now needed to accumulate $150,000 in 10 years.

Required:

How much money does Jeffrey need to deposit now? Use the appropriate present or future value table that may be found by clicking on the Present & Future Values button. Be sure to use all digits shown on the table and round your answer to a whole dollar. $ _________________

5.

eBookP & F ValuesP & F ValuesP & F ValuesP & F ValuesP & F ValuesP & F Values

Comparison of Alternatives

Jane Bauer has won the lottery and has the following four options for receiving her winnings:

1. Receive $102,500 at the beginning of the current year
2. Receive $108,650 at the end of the year
3. Receive $20,460 at the end of each year for eight years
4. Receive $10,000 at the end of each year for 30 years

Jane can invest her winnings at an interest rate of 6% compounded annually at a major bank.

Calculate the Present value for each of the above options. Round all answers to the nearest dollar. Use the appropriate present or future value table that may be found by clicking on the Present & Future Values button.

	Present Value
Option 1	$ _________________
Option 2	$ _________________
Option 3	$ _________________
Option 4	$ _________________

Which of the payment options should Jane choose? _________________

6.

eBookP & F ValuesP & F ValuesP & F ValuesP & F ValuesP & F ValuesP & F Values

Time Value of Money Concept

The following situations involve the application of the time value of money concept. Use the appropriate present or future value table that may be found by clicking on the Present & Future Values button. Use the full factor when calculating your results.

1. Janelle Carter deposited $9,830 in the bank on January 1, 1997, at an interest rate of 10% compounded annually. How much has accumulated in the account by January 1, 2014? Round to the nearest whole dollar. $ _________________

2. Mike Smith deposited $24,910 in the bank on January 1, 2004. On January 2, 2014, this deposit has accumulated to $58,971. Interest is compounded annually on the account. What rate of interest did Mike earn on the deposit? Round to the nearest whole percent. _________________ %

3. Lee Spony made a deposit in the bank on January 1, 2007. The bank pays interest at the rate of 8% compounded annually. On January 1, 2014, the deposit has accumulated to $12,590. How much money did Lee originally deposit on January1, 2007? Round to the nearest whole dollar. $ _________________

4. Nancy Holmes deposited $6,480 in the bank on January 1 a few years ago. The bank pays an interest rate of 12% compounded annually, and the deposit is now worth $25,246. How many years has the deposit been invested? Round to the nearest whole year. _________________ years