Question

answer the problem solving under investment management?

Problem 5

Find the future value of a 15-year, $300 per year annuity at 6%.

The answer is:  

Problem 6

How much would you have to deposit now to have $15,000 in 8 years if interest is 7%?

The answer is:  

Problem 7

Find the present value of a 3-year, $500 annuity at 4%.

The answer is:  

Problem 8

Find the present value of a $400 payment received each six months for 3 years.

Interest is 4%, compounded semiannually.

The answer is:  

Answer 1

Problem 5
Find the future value of a 15-year, $300 per year annuity at 6%.

FV = A((1+r)^n-1) / r
where FV = Future Value
A = Annuity
r = Rate of Interest
n = time period

FV = $300((1+6%)^15-1) / 6%
FV = $300(2.3965582-1) / 6%
FV = $300 *23.27596988
FV = $6,982.79

The answer is:  $6,982.79

Problem 6
How much would you have to deposit now to have $15,000 in 8 years if interest is 7%?

PV = FV / (1+r)^n
where PV = Present Value
FV = Future Value
r = Rate of Interest
n = time period

PV = $15,000 / (1+0.07)^8
PV = $15,000 / 1.71818618
PV = $8,730.14

The answer is:  $8,730.14

Problem 7
Find the present value of a 3-year, $500 annuity at 4%.

PV = A * PVAF(r,n)
where PV = Present Value
A = Annuity
r = Rate of Interest
n = time period

PV = $500*PVAF(4%,3)
PV = $500 * 2.775091033
PV = $1,387.55

The answer is:  $1,387.55

Problem 8
Find the present value of a $400 payment received each six months for 3 years.
Interest is 4%, compounded semiannually.

PV = A * PVAF(r/m, n*m)
where PV = Present Value
A = Annuity
r = Rate of Interest
n = time period
m = Number of Compounding periods

PV = $400 * PVAF(4%/2,3*2)
PV = $400 * PVAF(2%,6)
PV = $400 * 5.60143089
PV = $2,240.57

The answer is: $2,240.57