Question

Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. Do not round intermediate calculations. Round your answers to the nearest cent.

1. An initial $200 compounded for 1 year at 9%.

   $  

2. An initial $200 compounded for 2 years at 9%.

   $  

3. The present value of $200 due in 1 year at a discount rate of 9%.

   $  

4. The present value of $200 due in 2 years at a discount rate of 9%.

   $  

Answer 1

Thesw can be done very easily using the financial calculator very easily using following key strokes :->

A) PV = -200

N = 1

I/Y = 9

Compute FV = 218

Future value = 218

B )

PV = -200

N = 2

I/Y = 9

Compute FV = 237.62

Future value = 237.62

C) FV = 200

I/Y = 9

N = 1

Compute PV = -183.48

Present value = 183.48

D) FV= 200

N = 2

I/Y = 9

Compute PV = $168.33

These can be also solved using simple formula

FV = PV (1 plus r) ^nt

N = number of periods

T = number of years