Question

Time Value of Money: Basics
Using the equations and tables in Appendix 12A 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 $12,500 invested today in a certificate of deposit with interest compounded annually at 10 percent.

$Answer

b. The present value of $14,000 to be received in five years, discounted at 8 percent.

$Answer

c. The present value of an annuity of $27,500 per year for four years discounted at 12 percent.

$Answer

d. An initial investment of $49,220 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 $14,000, $17,000 and $15,000 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 $14,000 at the end of Years 8, 9, and 10. Use a discount rate of 12 percent.
$Answer

Answer 1

Answer is as below: