Question and answer
3. Computing the Time Value of Money. Using time value of money tables, calculate the following. a. The future value of $450 six years from now at 7 percent. b. The future value of $800 saved each
year for 10 years at 8 percent. c. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years from now. d. The amount a person would have to deposit today to be able to take out $500 a year for 10 years from an account earning 8 percent.
The answer is a. The future value of $450 six years from now at 7 percent.
Expert answered|bongche|Points 1674|
Question
Asked 4/22/2012 12:52:27 AM
Updated 4/17/2013 4:55:36 PM
1 Answer/Comment
Get an answer
New answers
Rating
0
Solution:
F = P (1 + i)^n
a. The future value of $450 six years from now at 7 percent.

F = 450 * 1.07^6 = $ 675.33

b. The future value of $800 saved each year for 10 years at 8 percent.
each year saving, A = $800
F = A[(1+i)^n - 1]/i = 800 [1.08^10 -1]/ 0.08 = $11,589.25

c. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years
from now.
F = P(1+i)^n
1000 = P* 1.06^5
P = $747.26 (the present value)

d. The amount a person would have to deposit today to be able to take out $500 a year for 10 years from an account earning
8 percent

P(1+i)^n = A[(1+i)^n - 1]/i
P * 1.08^10 = 500 [1.08^10 -1]/0.08
P = $15,637.70 (amount to be deposited today)
Added 4/17/2013 4:55:36 PM
Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
19,802,703 questions answered
Popular Conversations
The normal balance of an account is the
Weegy: The normal balance of an account is the debit balance. User: Which of the following accounts have normal debit ...
3/5/2015 4:21:31 PM| 2 Answers
Revenues and expenses are found on the a statement of owners equality ...
Weegy: Revenues and expenses are found on the B. Balance sheet
3/5/2015 4:42:18 PM| 2 Answers
Which of the following was a result of Austria-Hungary s annexation ...
Weegy: The following was a result of Austria-Hungary s annexation of Bosnia and Herzegovina- The stage was set for WWI. ...
3/5/2015 12:03:54 AM| 1 Answers
What is matrix
3/5/2015 12:09:40 AM| 1 Answers
Weegy Stuff
S
L
P
L
P
P
P
Points 293 [Total 8179]| Ratings 0| Comments 293| Invitations 0|Offline
S
P
C
L
P
L
1
P
Points 144 [Total 7451]| Ratings 1| Comments 134| Invitations 0|Offline
S
1
L
Points 94 [Total 1005]| Ratings 1| Comments 84| Invitations 0|Offline
S
1
L
L
Points 79 [Total 7580]| Ratings 0| Comments 79| Invitations 0|Offline
S
Points 72 [Total 577]| Ratings 4| Comments 32| Invitations 0|Offline
S
Points 22 [Total 390]| Ratings 0| Comments 22| Invitations 0|Offline
S
Points 17 [Total 108]| Ratings 0| Comments 17| Invitations 0|Offline
S
Points 12 [Total 12]| Ratings 0| Comments 12| Invitations 0|Offline
S
Points 11 [Total 127]| Ratings 1| Comments 1| Invitations 0|Offline
S
Points 10 [Total 10]| Ratings 1| Comments 0| Invitations 0|Offline
Home | Contact | Blog | About | Terms | Privacy | Social | ©2014 Purple Inc.