Time Value of Money: Basics

Using the equations and tables in Appendix 12A of this chapter, determine the answers to each of the following independent situations:

Round all answers to the nearest whole number.

a. The future value in two years of $11,500 invested today in a certificate of deposit with interest compounded annually at 10 percent.

$Answer

b. The present value of $13,000 to be received in five years, discounted at 8 percent.

$Answer

c. The present value of an annuity of $26,500 per year for four years discounted at 12 percent.

$Answer

d. An initial investment of $48,220 is to be returned in six equal annual payments. Determine the amount of each payment if the interest rate is 16 percent.

$Answer

e. A proposed investment will provide cash flows of $13,000, $16,000 and $14,000 at the end of Years 1, 2, and 3, respectively. Using a discount rate of 16 percent, determine the present value of these cash flows.

Present ValueYear 1Answer

Year 2Answer

Year 3Answer

TotalAnswer

f. Find the present value of an investment that will pay $13,000 at the end of Years 8, 9, and 10. Use a discount rate of 12 percent.

$Answer