. Time Value of Money Lump Sums 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 is the process of going from today's values to future amounts. The PV equation is PVN = PV(1+1) Here, PV - present value; 1 - Interest rate per year, and number of periods. You can use calculators and spreadsheets to find future values. A graph of the compounding process shows how any sum grows over time at various interest rates. The greater the interest rate, the faster the growth rate. Finding the present value (PV) is called discounting, and it is simply the reverse of compounding In general, the present value of a cash now due Nyears in the future is the amount which, if it were on hand today, would grow to equat the given future amount. The DV equation is: Present value - Py. (11 A graph of the discounting process shows how the present value of any oum to be received in the future decreases and approaches the years to receipt increases, and the present value declines faster at higher vinterest rates. The fundamental paal of financial management is to maximize the firm's value, and the value of any asset is the present value of its expected future canh Hows. One can solve for either the interest rate or the number of periods using the FV and the PV equations. The musiest way to solve for these variables is with a financial calculator or a spreadsheet Quantitative Problem 1 you deposit $1,600 into an account that pays o per year. Your plan is to withdraw this amount at the end of yours to wora down payment on a new car. How much will you be able to withdraw at the end of 5 years? Round your answer to the nearest cont. Do not found intermediate calculations 2141 Quantitative Problem 2. Today, you invest a lump sum amount in an ulty fund that provide an sin annual return. You would like to have $11.2006 years to help with a down mayment for a home. How much do you need to depout today to reach your $11,200 goal Round your answer to the nearest cent. Do not round intermediate cuculation Check My Work ca romanina)