The following situations require the application of the time value of money: Use the appropriate present or
Question:
The following situations require the application of the time value of money:
Use the appropriate present or future value table:
FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1
1. On January 1, 2017, $16,000 is deposited. Assuming an 8% interest rate, calculate the amount accumulated on January 1, 2022, if interest is compounded (a) annually, (b) semiannually, and (c) quarterly. Round your answers to the nearest dollar.
Future Value | ||
a. Annual compounding | $ | |
b. Semiannual compounding | $ | |
c. Quarterly compounding | $ |
2. Assume that a deposit made on January 1, 2017, earns 8% interest. The deposit plus interest accumulated to $20,000 on January 1, 2022. How much was invested on January 1, 2017, if interest was compounded (a) annually, (b) semiannually, and (c) quarterly? Round your answers to the nearest dollar.
Present Value | ||
a. Annual compounding | $ | |
b. Semiannual compounding | $ | |
c. Quarterly compounding | $ |
3.
Steve Jones has decided to start saving for his son's college education by depositing $2,000 at the end of every year for 15 years. A bank has agreed to pay interest at the rate of 4% compounded annually.
Use the appropriate present or future value table:
FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1
Required:
How much will Steve have in the bank immediately after his 15th deposit? Round your answer to the nearest dollar. Use the full factor when calculating your results.
$
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton