Question

Construct a table and a graph showing the relationship between interest rates, time, and future value by showing how $10,000 would grow each successive year over a 25-year period at different interest rates. Use $10,000 for your present value and calculate the future value of this $10,000 each year over the 25-year period at 0%, 2%, 4%, 6%, 8%, 10%, 15%, and 20% compounded annually. Future Value should be the y-axis for your graph and years (or time) should be your x-axis and you should end up with a line for each interest rate on your graph. Please insert your graph (chart) under your table of future values.

Using Excel, please! I asked this question earlier and it was done incorrectly. I was wondering if someone else could help!

Answer 1

Time Value of money means that a sum of rupee received today has more value than the same amount to be received in future.

There are two techniques of incorporating Time value of money in financial decision making..

1) Present Value - when we calculate the value of money in the Present point of time

Present value formula = FV / (1+ r)^ⁿ

where FV = Future value

r= rate of interest   

n= number of years for which discounting is done

2) Future value - when we calculate the value of money into the Future point of time

FV = PV * (1+r)^ⁿ