Exam 14: Applying Present and Future Values

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value of an annuity table can be used to determine the value today of a series of payments to be received in the future.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each. How much is the company able to borrow if the annual interest rate is 10% compounded semiannually?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest compounded annually?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Patricia wants to invest a sum of money today that will yield $10,000 at the end of 6 years. Assuming she can earn an interest rate of 6% compounded annually, how much must she invest today?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is beginning a savings plan to purchase new equipment when the current equipment is expected to wear out. It will be saving $7,500 every six months for the next 10 years. How much will the company have accumulated after the last year-end deposit, assuming the fund earns 10% interest compounded semiannually?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462. n = 6 semiannual periods, i = 5% semiannual interest rate; from the PV of $1 table the factor is 0.7462

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Milton Shirer has won the New York state lottery when the jackpot was $20 million. He has the options of taking the prize winnings as $2 million per year over the next ten years or a single payment now of $13,000,000. Which option should Milton choose based on present value principles and assuming an 8% annual interest rate compounded annually?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for 7 years. What is the amount of the annual deposits that the company must make?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Russell Company has acquired a building with a loan that requires payments of $20,000 every six months for 5 years. The annual interest rate on the loan is 12%. What is the present value of the building?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company needs to have $200,000 in 4 years, and will create a fund to insure that amount will be available. If it can earn a 7% return compounded annually, how much must the company invest in the fund today to equal the $200,000 at the end of 4 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Trey has $105,000 now. He has a loan of $175,000 that he must pay at the end of 5 years. He can invest his $105,000 at 10% interest compounded semiannually. Will Trey have enough to pay his loan at the end of the 5 years? If not, by how much will he be short?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is considering an investment that will return $22,000 at the end of each semiannual period for 4 years. If the company requires an annual return of 10%, what is the maximum amount it is willing to pay for this investment?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of the next five years. This transaction includes interest at 9%, compounded annually. What is the value of the machine today?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 How long will it take an investment of $25,000 at 6% compounded annually to accumulate to a total of $35,462.50?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The future value of an ordinary annuity is the accumulated value of each annuity payment excluding interest as of the date of the final payment.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 What amount can you borrow if you can make six future quarterly payments of $4,000 at a 12% annual rate of interest?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A series of equal payments made or received at the end of each period is an ordinary annuity.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 If we want to know the value of present-day assets at a future date, we can use:

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Cody invests $1,800 per year from his summer wages at a 4% annual interest rate. He plans to take a European vacation at the end of 4 years when he graduates from college. How much will he have available to spend on his vacation?