Time Value of Money-Simple Interest

 

Future Value=Present Value x (1 + Interest Rate)

 

Compounding to Determine Future Value

 

Future Value = Present Value x [(1 + Interest Rate) x (1 + Interest Rate) x ….)]

 

Discounting to Determine Present Value

 

Present Value = Future Value x {[1/(1 + Interest Rate)] x [1/(1 + Interest Rate)]}

 

 

1.  You have been given $2,000.00 to save or invest for one year at an interest rate of 8.00%.  What will be the value of your savings after one year?

 

2.  You are planning to save for college tuition for a child.  You plan to invest $3,000.00 for two years and a bank will pay you compound interest of 7% per year.  What will be the value after two years?

 

3.  The future value of $200 received today and deposited at 8 percent for three years is?

 

4. Determine the Present Value if $5,000 is received in 4 years at 9 percent interest rate.

 

5. If you invested $2,000 today at 6% interest rate in 3 years would result in a future value of?