Question

a. What is the future value of $10,000 invested for 15 years at 9%?

b. What is th future value of $10,000 invested each year for 15 years at 9%?

c. What amount must be invested today to pay out the following if 8% can be earned on investments?

-$10,000 in 10 years

-$10,000 in each of the next 10 years

Answer #1

a.We use the formula:

A=P(1+r/100)^n

where

A=future value

P=present value

r=rate of interest

n=time period.

A=$10000(1.09)^15

=$10000*3.64248246

**=$36424.82**

**2.**Future value of annuity=Annuity[(1+rate)^time
period-1]/rate

$10000[(1.09)^15-1]/0.09

=$10000*29.36091622

=**$293,609.16(Approx).**

**c.**Present value of inflows=cash inflow*Present
value of discounting factor(rate%,time period

$10000/1.08^10

=$10000*0.463193488

=**$4631.93(Approx).**

**d.**Present value of
annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$10000[1-(1.08)^-10]/0.08

$10000*6.710081399

=**$67100.81(Approx).**

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