Question

1. What is the present value of $160,000 to be received in 9 years from today? Assume a per annum discount rate of 9%, compounded annually. (Round to the nearest penny, e.g. 1234.56)

Answer:

2. You just purchased a parcel of land for $73,000. To earn a 14% annual rate of return on your investment, how much must you sell the land for in 5 years? Assume annual compounding. (Round to the nearest penny, e.g. 1234.56)

Answer:

Earnest T needs $970 for his next trip to Raleigh. He has $620 in cash. How long in years will it take the $620 cash to grow to $970 if Earnest T earns 6.8% per annum on his cash, compounded quarterly? (Enter your answers in years to 2 decimal places, e.g., 12.34)

Answer:

Answer 1

1.Information provided:

Future value= $160,000

Time= 9 years

Interest rate= 9%

Enter the below in a financial calculator to compute the present value:

FV= -160,000

N= 9

I/Y= 9

Press the CPT key and FV to compute the present value.

The value obtained is 73,668.44.

Therefore, the present value is $73,668.44.

2.Information provided:

Present value= $73,000

Time= 5 years

Interest rate= 14%

The question is solved by calculating the future value.

Enter the below in a financial calculator to compute the future value:

PV= -73,000

N= 5

I/Y= 14

Press the CPT key and FV to compute the future value.

The value obtained is 140,555.26.

Therefore, you must sell for $140,555.26 in 5 years.

3.Information provided:

Present value (PV)= $620

Future value (FV)= $970

Quarterly interest rate (I/Y)= 6.8%/4= 1.70% per quarter

Enter the below in a financial calculator to compute the time needed to accumulate $970:

FV= 970

PV= -620

I/Y= 1.70

Press the CPT key and N to compute the time of the loan.

The value obtained is 26.5512

Therefore, the time needed to accumulate $970 is 26.5512/4 = 6.6378 6.64 years.

In case of any query, kindly comment on the solution.