In a book named "Cases in Financial Management," case 11 - Davis, Michaels, and Company

Topic - Discounted Cash Flow

14th - edition

On the Texas Instruments BA II Plus Financial Calculator, press: 1 N 10 I/Y 10000 + I- (I key to make it a negative number - calculator assumes a cash outflow) PV 0 PMT CPT FV (answer = $11,000)

1. Consider a 1-year, $10,000 CD.

1a. Maturity (future value) of 10 percent (annual) interest

2. Now consider a 5 year CD using 5 year ending date.

3. It is estimated that in five years the total cost for one year of college will be $20,000.

4. Now consider the second alternative-five annual payments of $2,000 each. Assume that the payments are made at the end of the year.

On th Texas Instruments BA II II Financial Calculator, press 5 N 10 I/Y (all other numbers are same as 1a) CPT FV (answer = $16, 105)

QUESTION???

What is the future value of this annunity if the payments are invested in an account paying 10 percent interest annually?

What size payment woul be needed to accumulate $20,000 under annual compounding at a 10 pecent interest rate?

Change 20,000 to 10,000

Change 10,000 to 1,000.