Question: Time Value of Money-Simple Interest Future Value=Present Value x (1 + Interest Rate) Compounding to Determine Future Value Future Value = Present Value x [(1

Time Value of Money-Simple Interest

Future Value=Present Value x (1 + Interest Rate)

Compounding to Determine Future Value

Future Value = Present Value x [(1 + Interest Rate) x (1 + Interest Rate) x ….)]

Discounting to Determine Present Value

Present Value = Future Value x {[1/(1 + Interest Rate)] x [1/(1 + Interest Rate)]}

1. You have been given $2,000.00 to save or invest for one year at an interest rate of 8.00%. What will be the value of your savings after one year?

2. You are planning to save for college tuition for a child. You plan to invest $3,000.00 for two years and a bank will pay you compound interest of 7% per year. What will be the value after two years?

3. The future value of $200 received today and deposited at 8 percent for three years is?

4. Determine the Present Value if $5,000 is received in 4 years at 9 percent interest rate.

5. If you invested $2,000 today at 6% interest rate in 3 years would result in a future value of?

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