Present Value and Future Value The following situations require the application of the time value of money:

Question:

Present Value and The following situations require the application of the time value of money:
1. On January 1, 2010, $16,000 is deposited. Assuming an 8% interest rate, calculate the amount accumulated on January 1, 2015, if interest is compounded
(a) Annually,
(b) Semiannually, and
(c) Quarterly.
2. Assume that a deposit made on January 1, 2010, earns 8% interest. The deposit plus interest accumulated to $20,000 on January 1, 2015. How much was invested on January 1, 2010, if interest was compounded
(a) Annually,
(b) Semiannually, and
(c) Quarterly?

Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...