Present and Future Value Computations

Required:

1. Determine the present value in each of the following situations:

a. A $9,000 loan to be repaid in full at the end of five years. Interest on the loan is payable quarterly. The interest rate is 8% compounded quarterly.

b. A six-year note for $12,000 bearing interest at an annual rate of 12%, compounded semiannually. Interest is payable semiannually.

c. A one-year mortgage to be paid in monthly installments of $6,000. The interest rate is 12% compounded monthly.

2. Determine the future value in each of the following situations:

a. An investment of $20,000 today to earn interest at 8% compounded semiannually to provide for a down payment on a house four years from now.

b. An investment of $40,000 today to earn interest at 12% compounded quarterly that is designated for a charitable contribution 15 years from now when the donor retires.