Please show all work (Indicate formula or calculator inputs used) 1. Future Value Suppose you had a relative deposit $100 at 5.5% interest 100 years ago. a) How much would the investment be worth today using simple interest? b) How much would the investment be worth today using compound interest? c) What is the effect of compounding? FV simple = PV (1+rxt) FV compound = PV(1 + r) 2. Present Value Suppose you need $15,000 in 3 years. a) If you can earn 6% annually, how much do you need to invest today? b) If you could invest the money at 8%, would you have to invest more or less than at 6%? How much? PV=FV/(1 + r) 3. Discount Rate and Number of Time Periods a) Suppose you are offered an investment that will allow you to double your mone in 6 years. You have $10,000 to invest. What is the implied rate of interest? b) You have $10,000 to invest. How long will it take to double this $10,000 in valu if it earns 5% annually? How long does it take if you use the rule of 72? r=(FV/PV)|t-1 t = ln(FV/PV) / In(1+r) Rule of 72 = 72/r%