Instruction : fx function above will be used to caclutate the answers FUTURE VALUE - SINGLE LUMP SUM PAYMENT Practice Problem 1.1 Compounding Interest - Future Value (FV) You deposit $1900 today with ABC Bank. The bank will give .08 percent interest. How much you will receive at the end of 10 (ten) years ? N = 10, r = .08, pv -1900 What is fv ? Answer Practice Problem 1.2. Practice Problem FV Compounded Interest - Compute FV (Future Value) pv (present value) |n (number of period) - Year R (rate of fv (future value - interest ANSWER 1. -1,000 0.06 2. -1,000 8 0.07 Compute Problem 1.3 - Compute FV (Future Value) - Compunding Interest n (number of period) - R (rate of Compute fv PV Present ValuYear interest) (future value) -1000 0.04 -1000 0.08 3 -1000 9 0.05PRESENT VALUE - SINGLE LUMP SUM PAYMENT Practice Problem 2.1. Practice Problem PV Compounded Interest - Compute PV (Present Value) fv (future n (number of period) -|R (rate of pv (present value - value) Year interest) (ANSWER) $1.000 6 0.08 2 $1,000 0.07 Compute Problem 2.2 - Compute PV ( Value) - Compunding Interest FV(Future n (number of period) - R (rate of Compute pv Value) Year interest) [present value) 1000 0.09 W N P 1000 8 0.06 1000 9 0.03 Practice Problem 3.1 -r (interest rate) Solving for Interest Rate Problem 3.1. Finding Interest Rate Assume that the present value of an investment is $1,000, the future value is $1,903, the time period is 5(Five) years. What is the compound rate of interest for the investmer N =6, pv - $1,000, fv $1,903, what is r= ?Practice Problem 3.1 - r (interest rate) Solving for Interest Rate Problem 3.1. Finding Interest Rate Assume that the present value of an investment is $1,000, the future value is $1,903, the time period is 5(Five) years. What is the compound rate of interest for the investmen N = 6, pv - $1,000, fv $1,903, what is r = ? Answer Practice Problem 3.2 -r (interest rate) Compute Interest Rate fv (future value) n (number of period) - Year pv (present r (interst rate - value) (ANSWER 1 . $1,000 -732.14 2. $1,000 6 865.258 Compute Problem 3.3 - r (interest rate) Compute Interest Rate fv (future value) r (interst rate - n (number of period) - Year Pv (present value) (ANSWER) 1 . $1.000 -753.14 2. $1,000 -732.258 3 $1.000 5 831.681Practice Problem 4.1 - n [number of period] Solvigglornumber oi period Practice Problem 4.2. Finding n number of period Assume thatthe present value of an investment is$1,000, the future value is $2,608, the interest rate is .09. what is the time period ? r = .0}; pv $1,000, fv 51,403, What is n = E" MnsII-er lI-ill be Calculated [or practice Practice Problem 4.3 n [number of periods] Compute number of periods 1. 2. Compute Problem 4.4 - n [number of periods] Compute number 01 periods 11 (number of r (interest rate) period) Year ANSW 1. $1,000 0.08 ?98.14 2. $1,000 0 04 448.258 3 $1,000 0.03 820.681 ANNUITY - MULTIPLE PAYMENTS MADE OR RECEIVED FUTURE VALUE [FV) For ANNUITY Problem 5. 1. Annuity - Multiple Payments - Compounding Interest - Annuity - Future Value (FV) You deposit $0 now, $1,000 at the end of year 1, $1,000 at the end of year 2, and $1,000 at the end of year 3 with ABC Bank. The bank will give .07 percent interest. How much you will receive at the end of 3 (three) years ? N =3, r =.07, PMT - 1000 end of yr 1, at the end of year 2, - 1000 end of yr 3. Compute the FV. ANSWER will be Calculated for practice Problem 5. 2. Annuity - Multiple Payments - Compounding Interest - Annuity - Compute Future Value (FV) n (number fv (future PMT (Payments) r(rate of interest) of period) - value) Year ANSWER -1000 0.09 8 2 -1000 0.05 6 3 -1000 0.04 7Problem 5. 3. Annuity - Multiple Payments - Compounding Interest - Annuity - Compute Future Value (FV) PMT n (number fv (future (Payments) r(rate of interest) of period) - value) Year ANSWER -1000 0.03 8 -1000 0.06 7 -1000 0.08 6 PRESENT VALUE [FV) For ANNUITY Problem 6.1. Multiple Payments - Compounding Interest - Annuity - Present Value (PV) You will receive $1,000 per year beginning one year from now for a period of 3(three) years at an 6% (six percent) interest rate. How much will you be willing to pay now for this stream of cash flow ? N = 3, r=.06, PMT 1000 to be received end of yr 1, 2,3. Compute the PV of the money you are willing to pay. Answer Calculate Yourself 6.2. Practice Problem - -Annuity - Compute Present Value PMT n (number (Payments) r(rate of interest) of period) pv (present Year value) 1 1000 0.03 8 2 1000 0.06 7 3 1000 0.05 96.3. Compute Problem - - Annuity - Compute Present Value PMT n (number pv (present (Payments) r(rate of interest) of period) Year value) 1 1000 0.03 10 2 1000 0.06 8 1000 0.04 9 Practice Problem 7.1. FINDING ANNUAL Annuity PAYMENTS It is necessary in many instances to determine the periodic equal payments required for an annuity. For example, you like to accumulate $10,000 at the end of 5 (five) years from now by making equal annual payments beginning one year from now. If you can invest at a compound 5% (Five percent) interest rate, what will be the amount of each of your annual payments ? Answer Will be Calculated for practice 7.2. Practice Problem - - Annuity - Payments fv (future n (number PMT value) r(rate of interest) of period) - (Payments) Year ANSWER 1 15000 0.05 12 2 12000 0.05 10 3 13000 0.04 97.3. Compute Problem - - Annuity - Payments fv (future n (number PMT value) r(rate of interest) of period) - (Payments) Year ANSWER 16000 0.06 15 2 13000 0.04 10 LA 12000 0.03 9