payments are known as lump sums, We can solve for the future value or the present value of a lump sum as we discuss below. Finding the future value (FV), or is the process of going from today's values to future amounts. The F equation is: FVN=PV(1+r)N Here, PV = present value; I = interest rate per year, and N= number of periods, You can use calculators and spreadsheets to find futire values. A graph of the shows how any sum grows over time at various interest rates. The greater be intereat rate, the Finding the present value (PW) is called discounting, and it is simply the reverse of which, if it were on hand today, would grow to equal the given future ameunt. The PV equation is: the growth rate. In general, the present walue of a cash flow due N vears in the futiors is the anount Presentvalue=PV=(1+1)4Wx spreadsheet. Quantitative Problem 1t You deposit $2,300 into an account that pays 3% per year, Your plan is to withdraw this amount at the end of 5 years to use for a down purment an a neen cax How much wall you be abie to withdraw at the end of 5 years? Do not round intermediste calculations. Round your answer to the neareat cert. 5 Quantitative Problem 2: Today, you invest a fump sum amount in an equity fund that provides an 84 annual return, You would ike to have 510,900 in 6 years to heip mith a demen poyment for a home. How much do you need to deposit today to reach your $10,900 goai? Do not nound intermediate calculations Reund your answer to the neareat cent. 5