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Chapter 6: Q3E (page 303)

Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.) (a) What is the future value of \(7,000 at the end of 5 periods at 8% compounded interest? (b) What is the present value of \)7,000 due 8 periods hence, discounted at 6%? (c) What is the future value of 15 periodic payments of \(7,000 each made at the end of each period and compounded at 10%? (d) What is the present value of \)7,000 to be received at the end of each of 20 periods, discounted at 5% compound interest?

Short Answer

Expert verified

The future value of $7,000 compounded annually at 8% will be $10,285, the present value of $7,000 discounted at 6% will be $4,392, the future value of periodic payments of $7,000 will be $222,408, and the present value of $7,000 periodically will be $87,235.

Step by step solution

01

Step 1:Computation of future value

FutureValue=PresentValue脳FVfactor=7,000脳1.4693=$10,285

02

Computation of Present value

PresentValue=FutureValue脳PVfactor=7,000脳0.62741=$4,392

03

Calculation of future value of the periodic payment

FutureValue=PeriodicPayment脳FVfactor=7,000脳31.7725=$222,408

04

Calculation of Present Value of the periodic payment

PresentValue=PeriodicPayment脳PVfactor=7,000脳12.4622=$87,235

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