Present Value

a. Titus wishes to have $50,000 in six years. He can make an investment today that will earn 8 percent each year, compounded annually. What amount of investment should he make today to achieve his goal?

b. Jacob is going to receive $400,000 on his 50th birthday, 20 years from today. He has the opportunity to invest money today in a government-backed security paying 5 percent compounded annually. How much would he be willing to receive today instead of the $400,000 in 20 years?

c. Jason has $60,000 today that he intends to use as a down payment on a house. How much money did Jason invest 20 years ago to have $60,000 now if his investment earned 8 percent compounded annually?

d. Lonnie is the host of a television game show that gives away thousands of dollars each day. One prize on the show is an annuity, paid to the winner, in equal installments of $200,000 at the end of each year for the next five years. If a winner has an investment opportunity to earn 8 percent, annually, what present amount would he or she take in exchange for the annuity?

e. Keri is going to be paid modeling fees for the next ten years as follows: Year 1, $50,000; Year 2, $55,000; Year 3, $60,000; Years 48, $100,000; Year 9, $70,000; and Year 10, $45,000. She can invest her money at 7 percent compounded annually. What is the present value of her future modeling fees?