Q Search this cour 05: Homework Problems - Time Value of Money Compounding Pro SHOW TW any UWS WE U VU REDATES. TRE MUTESLIR VOR FUN Finding the present value (PV) is called discounting, and it is simply the reverse of compounding M. In general, the present value of a cash flow due N years in the future is the amount which, if it were on hand today, would grow to equal the given future amount. The PV equation is: Present value = PV- (1+0) A graph of the discounting process shows how the present value of any sum to be received in the future decreases and approaches as the years to receipt increases, and the present value declines faster at higher interest rates. The fundamental goal of financial management is to maximize the firm's value, and the value of any asset is the present y value of its expected future cash flows. One can solve for either the interest rate or the number of periods using the FV and the PV equations. The easiest way to solve for these variables is with a financial calculator or a spreadsheet. Quantitative Problem 1: You deposit $2,000 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 payment on a new car. How much will you be able to withdraw at the end of 5 years? Do not round intermediate calculations. Round your answer to the nearest cent. Quantitative Problem 2: Today, you invest a lump sum amount in an equity fund that provides an 8% annual return, you would like to have $11.700 in 6 years to help with a down payment for home. How much do you need to deposit today to reach your $11,700 goal? Do not round intermediate calculations. Round your answer to the nearest cent. $ Grade it Now Save & Continue Continue without saving AD 918 AM 2/25/2021