In: Finance
Please fill in the blanks in the following table:
Present Future Interest Time to
Value Value Rate Maturity
$20,000 6% 34 years
$200,000 7% 12 years
$55,000 $111,419.91 18 years
$90,000 $207,408.40 11%
a.
Future value formula = Presnet value*(1+interest rate)^time to matuirty
or FV = PV*(1+i)^n
=20000*(1+6%)^34
=145020.5055
Future value is $145020.51
b.
Present value formula = future value/(1+interest rate)^time to maturity
=200000/(1+7%)^12
=88802.39185
Present value is $88802.39
c
Interest rate formula = ((future value/present value)^(1/matuirty))-1
=((111419.91/55000)^(1/18))-1
=0.04000000086 or 4%
So interest rate is 4%
d.
There is no direct formula to calculate time to maturity. it will be calculated by trial and error method and interpolationf formula
Present value = Future value/(1+i)^n
90000 = 207408.4/(1+11%)^n
Assume n is 7 years
PV = 207408.4/(1+11%)^7
=99900.00035
Assume n is 9 years
PV =207408.4/(1+11%)^9
=81081.08136
interpolation formula = lower n +( (uper n - lower n)*(Uper value - actual value)/(uper value - lower value)
7 + ((9-7)*(99900.00035-90000)/(99900.00035-81081.08136)
=8.052132735 or 8 years
So time to matuirty is 8 years