Question

1. An initial $800 compounded for 10 years at 4%.

   $  

2. An initial $800 compounded for 10 years at 8%.

   $  

3. The present value of $800 due in 10 years at a 4% discount rate.

   $  

4. The present value of $800 due in 10 years at an 8% discount rate.

   $  

Answer 1

a.

Given

Initial value = Present Value PV = $800

Time period t = 10 years

Rate r = 4%

Formula for calculating Future Value FV

FV = PV *(1+ r)^t

FV = 800 * (1+ 0.04)^10 = $1184.195428

FV = $1,184.20

b.

Given

Initial value = Present Value PV = $800

Time period t = 10 years

Rate r = 8%

FV = PV *(1+ r)^t

FV = 800 * (1+ 0.08)^10 = $1727.139998

FV = $1,727.14

c.

Given

Amount due = Future Value FV = $800

Time period t = 10 years

Rate r = 4%

Formula for calculating Present Value PV

PV = FV /(1+ r)^t

PV = 800 / (1+ 0.04)^10 = $540.4513351

PV = $540.45

d.

Given

Amount due = Future Value FV = $800

Time period t = 10 years

Rate r = 8%

PV = FV /(1+ r)^t

PV = 800 / (1+ 0.08)^10 = $370.5547905

PV = $370.56

Note: Final answers rounded off to two decimal places