| 1. A deposit of $450 earns the following interest rates: |
| a. | 9 percent in the first year. |
| b. | 7 percent in the second year. |
| c. | 6 percent in the third year. |
(Round your answer to 2 decimal places.)
|
What would be the third year future value?
6. What is the present value of a $300 payment in one year when the discount rate is 9 percent?
. What is the value in year 6 of a $610 cash flow made in year 8 if interest rates are 9 percent?
8. What is the present value of a $1,450 payment made in seven years when the discount rate is 10 percent?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
9. What is the future value of $575 deposited for one year earning an interest rate of 8 percent per year?
| Consider a $1,500 deposit earning 8 percent interest per year for five years. |
| What is the future value? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
|
| 1 | |||||
| Year | Deposite | Interest % | |||
| 0 | 450 | ||||
| 1 | 9 | ||||
| 2 | 7 | ||||
| 3 | 6 | ||||
| What would be the third year future value | |||||
| Year | Deposite | Interest % | interest | Future value | |
| 0 | 450 | ||||
| 1 | 9 | 40.5 | |||
| 2 | 7 | 31.5 | |||
| 3 | 6 | 27 | 549 | ||
| 6. What is the present value of a $300 payment in one year when the discount rate is 9 percent | |||||
| Year | Deposite | D.F.% | Payment | Discounting factor @ 9% |
Future value |
| 3 | 9 | 300 | 0.917431193 | 275.2294 | |
| 7. What is the value in year 6 of a $610 cash flow made in year 8 if interest rates are 9 percent | |||||
| Year | Deposite | Interest % | interest | Future value Factor | Future value |
| 0 | 610 | ||||
| 1 | 9 | 54.9 | 1.6771 | 92.07279 | |
| 2 | 9 | 54.9 | 1.538623955 | 84.47046 | |
| 3 | 9 | 54.9 | 1.411582 | 77.49585 | |
| 4 | 9 | 54.9 | 1.295029 | 71.09709 | |
| 5 | 9 | 54.9 | 1.1881 | 65.22669 | |
| 6 | 9 | 54.9 | 54.9 | ||
| 1055.263 | |||||
| . | |||||
8
What is the present value of a $1,450 payment made in seven years when the discount rate is 10 percent?
PV = FV/(1+i)N
PV = 1450/(1+0.10)7
= 1450/4.86842
= 297.83
9. What is the future value of $575 deposited for one year earning an interest rate of 8 percent per year?
FVN = PV × (1 + i)N
FV1 = 575 × (1 + 0.08)1
= 575 × 1.08
= 621
10. How much total interest is earned on the original deposit
| Year | Deposite | Interest % | interest | Future value Factor | Future value |
| 0 | 1500 | ||||
| 1 | 8 | 120 | 1.713824269 | 205.6589 | |
| 2 | 8 | 120 | 1.586874323 | 190.4249 | |
| 3 | 8 | 120 | 1.469328077 | 176.3194 | |
| 4 | 8 | 120 | 1.36048896 | 163.2587 | |
| 5 | 8 | 120 | 1.259712 | 151.1654 | |
| 6 | 8 | 120 | 1.1664 | 139.968 | |
| 7 | 8 | 120 | 1.08 | 129.6 | |
| 8 | 8 | 120 | 120 | ||
| 2776.395 |
Interesst on interest =316.3953
| Year | Interest on Interest | |
| 1 | 85.65891 | |
| 2 | 70.42492 | |
| 3 | 56.31937 | |
| 4 | 43.25868 | |
| 5 | 31.16544 | |
| 6 | 19.968 | |
| 7 | 9.6 | |
| 8 | 0 | |
| 316.3953 | ||
