Time Value of Money: Basics

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

Round answers to the nearest whole number.

$($a$)$ The future value in two years of $$3,000$ deposited today in a savings account with interest compounded annually at $6$ percent.

$Answer

$3,370$

$($b$)$ The present value of $$12,000$ to be received in four years, discounted at $12$ percent.

$Answer

$7,490$

$($c$)$ The present value of an annuity of $$3,000$ per year for five years discounted at $14$ percent.

$Answer

$10,339$

$($d$)$ An initial investment of $$48,015$ is to be returned in eight equal annual payments. Determine the amount of each payment if the interest rate is $12$ percent.

$Answer

$8,509$

$($e$)$ A proposed investment will provide cash flows of $$30,000,$ $$12,000,$ and $$9,000$ at the end of Years $1,2,$ and $3,$ respectively. Using a discount rate of $20$ percent, determine the present value of these cash flows.

Year $1$ Answer

$25,000$

Year $2$ Answer

$7,438$

Year $3$ Answer

$($f$)$ Find the present value of an investment that will pay $$7,500$ at the end of Years $10,11,$ and $12.$ Use a discount rate of $14$ percent.

$Answer