Describe, compare, and contrast the concepts of future value and present value. Explain the role of the discount rate in calculating present value.
Answer to relevant QuestionsWhat is an annuity? How can calculation of the future value of an annuity be simplified? What about the present value of an annuity? Find the present value of each of the following streams of income, assuming a 12% discount rate. You purchased a car using some cash and borrowing $15,000 (the present value) for 50 months at 12% per year. Calculate the monthly payment (annuity). For each of the following investments, calculate the present value of the future sum, using the specified discount rate and assuming the sum will be received at the end of the given year. Explain how you can reconcile the traditional and modern portfolio approaches.
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