Intro The annual interest rate is 5%. Part 1 18 Attempt 1/10 for 10 pts. What is the present value (PV) of $1,000 that you'll receive in 12 years? 556.84 Correct T2 = 556.84 FV 1,000 PV = (1+1 + r) (1 + 0.05) Dividing the future value by (1+r) is called discounting, and it is used to adjust for the time value of money: it's always better to receive a cash flow earlier rather than later, because we can then invest the amount and earn interest on it. Similarly, it's always better to make a payment later rather than earlier, because we could invest the amount in the meantime and earn interest on it. Using a financial calculator: N/Y PV PMT FV 12 5 -1,000 Inputs Compute 0 556.84 Using Excel (do not enter the thousands separators): =PV(rate, nper, pmt, fv) =PV(0.05, 12, 0, -1,000) =556.84 Previous answers: 310.10; 886.91 Part 2 Attempt 3/10 for 10 pts. If you invest the amount found in part 1 now, how much will you have after 12 years? 0+ decima Submit Part 3 8 Attempt 1/10 for 10 pts. If you invest $556.84 now, how much will you have after 6 years? 0+ decima Submit Part 4 18 Attempt 1/10 for 10 pts. If you invest the amount found in part 3 for another 6 years, how much will you have at the end? 0+ decima