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 future value of an ________________ annuity is the accumulated value of each annuity payment with 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 An individual is planning to set-up an education fund for her daughter. She plans to invest $7,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 9 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest compounded quarterly. How much will Keisha have accumulated after 2 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 In a present value or future value table, the length of one time period may be interpreted as one year, one month, or any other length of time.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Sheryl Frasier has won the Indiana state lottery when the jackpot was $9 million. She has chosen to take the prize winnings as $1 million per year over the next nine years. Using a 7% annual interest rate, determine the present value of the $1 million annuity Sheryl will receive.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Interest may be defined as:

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 $100 compounded semiannually for 3 years at 12% equals $140.49. Future Value = Present Value * Interest Factor FV of 1 factor for n = 6 and i = 6% = 1.4185 Future Value = $100 * 1.4185 = $141.85

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 $5,000 per year for three years at 12% compounded annually is $12,009. 2.4018 is the PV factor on the Present Value of an Annuity table; n = 3; i = 12% Present Value of an Annuity = Annuity * PV Factor Present Value of an Annuity = $5,000 * 2.4018 = $12,009

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.

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 1 formula is often useful when a borrowed asset must be repaid in full at a later date and the borrower wants to know the worth of the asset at the future date.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Future value can be found if the interest rate (i), the number of periods (n), and the present value (p) are known.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jessica received a gift of $7,500 at the time of her high school graduation. She invests it in an account that yields 10% compounded semi-annually. What will the value of Jessica's investment be at the end of 5 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jason has a loan that requires a single payment of $4,000 at the end of 3 years. The loan's interest rate is 6%, compounded semiannually. How much did Jason borrow?

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 $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded semiannually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An individual is planning to set-up an education fund for his grandchildren. He plans to invest $10,000 annually at the end of each year. He expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years?

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10%. 7.7156 is the FV factor on the Future Value of an Annuity table; n = 6; i = 10% Future Value of an Annuity = Annuity * FV Factor Future Value of an Annuity = $5,000 * 7.7156 = $38,578

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 To calculate present value of an amount, two factors are required: The __________________ and the ___________________.

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An _____________ is a series of equal payments occurring at equal intervals.