Time Value of Money: Basics

Using the equations and tables in Appendix $12$A 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

$13,915$

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 Value

Year $1$ Answer

Year $2$ Answer

Year $3$ Answer

Total Answer

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.