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CheckPoint Chrissy Capstone Weeks FIN/200 Richard Webb March 23, 2012 a. If you invest \$9,000 today, how much will you have in? 3 years @ 7% FV = 9,000; rate = 7%; N = 3 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 1.449 = \$13,041 8 years @ 10% FV = 9,000; rate = 10%; N = 8 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 2.5937 = \$23,343.30 30 years @ 15% FV = 9,000; rate = 15%; N = 30 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 66.2118 = \$595,906.20 20 years @ 20% compounded semi-annually FV = 9,000; rate = 20%; N = 20 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 38.34 = \$345,060.00 b. What is the present value of the following amounts, promised in the stated number of years, assuming the stated discount rates? \$10,000 in 9 years @ 8% FV = 10,000; rate = 8%; N = 9 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.50025 = \$5,002.50 \$10,000 in 9 years @ 9% FV = 10,000; rate = 9%; N = 9 years; =? PV PV = FV x PVIF8%, 1 year = 10,000 x 0.46043 = \$4,604.30 \$10,000 in 12 years @ 10% FV = 10,000; rate = 10%; N = 12 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.31863 = \$3,186.30 \$10,000 in 15 years @ 11% FV = 10,000; rate = 11%; N = 15 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.20900 = \$2,090.00 c. Your uncle offers you a choice of \$25,000 in 50 years or \$95 today? If money is discounted at 12%, which should you choose? Option 1: FV = 25,000; rate = 12%; N = 50 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 2.211 PV= \$86.50 Option 2: \$95.00 I would choose the second option of \$95.00. c. Your aunt offers you a choice of \$30,000 in 25 years or \$850 today? If money is discounted at 11%, which should you choose? Option 1: FV = 30,000; rate = 11%; N = 25 years; PV =? PV = FV x PVIF8%, 1 year 30,000 x 0.073608 PV= \$2,208.24 Option 2: \$850.00 I would choose the first option of \$2,208.24. ... View Full Document

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