Time Value of Money: Basics

Using Excel or the equations and tables in Appendix $12$A of this chapter, determine the answers to each of the following independent situations:

Round answers to the nearest whole number.

$($a$)$ The future value in two years of $\backslash$$$5,000$ deposited today in a savings account with interest compounded annually at $4\backslash \%.$

$\backslash$$

$($b$)$ The present value of $\backslash (\backslash$$ $15,000\backslash )$ to be received in four years, discounted at $\backslash (10\backslash \%\backslash ).$

$\backslash$$

$($c$)$ The present value of an annuity of $\backslash (\backslash$$ $2,500\backslash )$ per year for five years discounted at $\backslash (12\backslash \%\backslash ).$

$\backslash$$

$($d$)$ An initial investment of $\backslash (\backslash$$ $69,845\backslash )$ is to be returned in eight equal annual payments. Determine the amount of each payment if the interest rate is $\backslash (8\backslash \%\backslash ).$

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$($e$)$ A proposed investment will provide cash flows of $\backslash (\backslash$$ $20,000,\backslash$$ $25,000\backslash ),$ and $\backslash (\backslash$$ $30,000\backslash )$ at the end of Years $1,2,$ and $3,$ respectively. Using a discount rate of $\backslash (6\backslash \%\backslash ),$ determine the present value of these cash flows.

$($f$)$ Find the present value of an investment that will pay $\backslash (\backslash$$ $3,000\backslash )$ at the end of Years $10,11,$ and $12.$ Use a discount rate of $\backslash (8\backslash \%\backslash ).$

$\backslash (\backslash$$ $\backslash )$