Single $$ 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 compounding $V,$ is the process of going from today's values to future amounts. The FV equation is:

$F{V}_N=PV(1+I{)}^N$

sum grows over time at various interest rates. The greater the interest rate, the slov $$ the growth rate. on hand today, would grow to equal the given future amount. The PV equation is:

Present value $=PV=\frac{PV}{(1+1{)}^N}$

A graph of the discounting process shows how the present value of any sum to be received in the future decreases and approaches $$ as the years to receipt increases, and the present value declines faster at $-$Selectflows. interest rates. The fundamental goal of financial management is to maximize the firm's value, and the value of any asset is the $$ value of its expected future cash higher

Quantitative Problem $1$: You deposit $$2,500$ 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.

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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 $$11,000$ in $6$ years to help with a down payment for a home. How much do you need to deposit today to reach your $$11,000$ goal? Do not round intermediate calculations. Round your answer to the nearest cent.

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