Question

Please compute the following present values and future values: 1) The future value of $500 invested for 10 years at 10% interest. 2) The future value of $800 invested for 5 years at 15% interest. 3) The future value of $30,000 invested for 20 years at 6%. 1) The present value of $200,000 to be received in 20 years, if discounting at 5%. 2) The present value of $80,000 to be received in 10 years, if discounting at 8%. 3) The present value of $1,000 to be received in 4 years, if discounting at 8%.

Answer 1

We use the formula:

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

where

A=future value

P=present value

r=rate of interest

n=time period.

1.

A=$500(1.1)^10

=$500*2.59374246

=$1296.87(Approx).

2.

A=$800(1.15)^5

=$800*2.011357188

=$1609.09(Approx).

3.

A=$30000(1.06)^20

=$30000*3.207135472

which is equal to =$96214.06(Approx).

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

1.

Present value=200,000/1.05^20

=$200,000*0.376889482

=$75377.90(Approx).

2.Present value=80000/1.08^10

=80000*0.463193488

=$37055.48

3.Present value=1000/1.08^4

=$1000*0.735029852

=$735.03(Approx).