Question

A. (1) What is the future value of an initial $100 after three years if it is invested in an account paying 10%annual interest?

(2) What is the present value of $100 to be received in three years if the appropriate interest rate is 10%?

B. We sometimes need to find how long it will take a sum of money (or anything else) to grow to some specified amount. For example, if a company’s sales are growing at a rate of 20%per year, approximately how long will it take sales to triple?

Answer 1

Answer to Qno. A 1

Present Value = $ 100

Time = 3 years

Interest Rate = 10%

Future Value = $ 100*(1+10%)^3 = $ 133.10

Answer to Qno. A 2

Future Value = $ 100

Time = 3 years

Interest Rate = 10%

Present Value = $ 100/(1+10%)^3

= $ 75.13

Answer to Q no B

When we need to find out how long it will take a sum of money ( or anything else ) to grow to some specified amount . For e.g Interest rate - 15%

PV - ($ 50)

FV - $ 100

PMT - $ 0

n - 4.96 years