5.10

Find the following values. Compounding/discounting occurs annually. Do not round intermediate calculations. Round your answers to the nearest cent.

a. An initial $500 compounded for 10 years at 10%.

$

b. An initial $500 compounded for 10 years at 20%.

$

c. The present value of $500 due in 10 years at 10%.

$

d. The present value of $1,140 due in 10 years at 20% and 10%.

Present value at 20%: $

Present value at 10%: $

e. Define present value.

1. The present value is the value today of a sum of money to be received in the future and in general is less than the future value.
2. The present value is the value today of a sum of money to be received in the future and in general is greater than the future value.
3. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value.
4. The present value is the value in the future of a sum of money to be received today and in general is less than the future value.
5. The present value is the value in the future of a sum of money to be received today and in general is greater than the future value.

-Select-IIIIIIIVVItem 6

How are present values affected by interest rates?