Question

Find the following values, using the equations, and then work the problems using a financial calculator to check your answers. Disregard rounding differences. (Hint: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.) Do not round intermediate calculations. Round your answers to the nearest cent.

a. An initial $300 compounded for 1 year at 6%. $

b. An initial $300 compounded for 2 years at 6%. $

c. The present value of $300 due in 1 year at a discount rate of 6%. $

d. The present value of $300 due in 2 years at a discount rate of 6%. $

Answer 1

1.
Future Value=Present Value*(1+rate)^n
=300*1.06^1
=318.00

Using financial calculator
N=1
PMT=0
PV=-300
I/Y=6%
CPT FV=318.00

2.
Future Value=Present Value*(1+rate)^n
=300*1.06^2
=337.08

Using financial calculator
N=2
PMT=0
PV=-300
I/Y=6%
CPT FV=337.08

3.
Present Value=Future Value/(1+rate)^n
=300/1.06^1
=283.01886792

Using financial calculator
N=1
PMT=0
FV=-300
I/Y=6%
CPT PV=283.01886792

4.
Present Value=Future Value/(1+rate)^n
=300/1.06^2
=266.99893200

Using financial calculator
N=2
PMT=0
FV=-300
I/Y=6%
CPT PV=266.99893200