Present and Future Value Computations

Required:

1. Compute the present value for each of the following situations, assuming an interest rate of 12% compounded annually.

(Round amounts to the nearest dollar.)

a. A single payment of $45,000 due on a mortgage five years from now.

b. A series of payments of $15,000 each, due at the end of each year for five years.

c. A five-year, 12% loan of $55,000, with interest payable annually and the principal due in five years.

2. Compute the future value amounts (rounded to the nearest dollar) in each of the following situations:

a. A $50,000 lump-sum investment today that will earn interest at 8% compounded annually over five years.

b. A $4,000 lump-sum investment today that will earn interest at 12% compounded quarterly, to provide money for a child’s college education 15 years from now.