Present and Future Values of Single Cash Flows for Different Interest Rates

Use both the TVM equations and a financial calculator to find the following values. (Hint: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.) Do not round intermediate calculations. Round your answers to the nearest cent.

1. An initial $700 compounded for 10 years at 3%.

   $

2. An initial $700 compounded for 10 years at 6%.

   $

3. The present value of $700 due in 10 years at a 3% discount rate.

   $

4. The present value of $700 due in 10 years at a 6% discount rate.

   $

2.

Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent.

1. $200 per year for 10 years at 10%.

   $

2. $100 per year for 5 years at 5%.

   $

3. $200 per year for 5 years at 0%.

   $

4. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

   Future value of $200 per year for 10 years at 10%: $

   Future value of $100 per year for 5 years at 5%: $

   Future value of $200 per year for 5 years at 0%: $

3.

Find the present value of the following ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press PV, and find the PV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent.

1. $800 per year for 10 years at 12%.

   $

2. $400 per year for 5 years at 6%.

   $

3. $800 per year for 5 years at 0%.

   $

4. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

   Present value of $800 per year for 10 years at 12%: $

   Present value of $400 per year for 5 years at 6%: $

   Present value of $800 per year for 5 years at 0%:

4.

1. Find the present values of the following cash flow streams. The appropriate interest rate is 8%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF₀ = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent.

   Year	Cash Stream A	Cash Stream B
   1	$100	$300
   2	400	400
   3	400	400
   4	400	400
   5	300	100

   Stream A: $

   Stream B: $

2. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar.

   Stream A $

   Stream B $