Time Value of Money-Simple Interest Future Value=Present Value x (1 + Interest Rate) Compounding to Determine Future
Question:
Time Value of Money-Simple Interest
Future Value=Present Value x (1 + Interest Rate)
Compounding to Determine Future Value
Future Value = Present Value x [(1 + Interest Rate) x (1 + Interest Rate) x ….)]
Discounting to Determine Present Value
Present Value = Future Value x {[1/(1 + Interest Rate)] x [1/(1 + Interest Rate)]}
1. You have been given $2,000.00 to save or invest for one year at an interest rate of 8.00%. What will be the value of your savings after one year?
2. You are planning to save for college tuition for a child. You plan to invest $3,000.00 for two years and a bank will pay you compound interest of 7% per year. What will be the value after two years?
3. The future value of $200 received today and deposited at 8 percent for three years is?
4. Determine the Present Value if $5,000 is received in 4 years at 9 percent interest rate.
5. If you invested $2,000 today at 6% interest rate in 3 years would result in a future value of?
