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Week 4 Individual Assignment

# Week 4 Individual Assignment - P4_4 FUTURE VALUE OF A...

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P4_4 Page 1 FUTURE VALUE OF A SINGLE AMOUNT Present value \$40,000 Interest rate, pct per year compounded annually 12% Number of years 9 Future value \$110,923.15 Entry in Cell B5 is =FV(B3,B4,0,–B2,0). The minus sign appears before B2 because the present value is an outflow (i.e., a deposit made by Jane Farber). Case Single Cash Flow A \$200 B 4,500 C 10,000 D 25,000 E 37,000 F 40,000

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P4_4 Page 2 Interest Rate Deposit Period (Years) Future Value 5% 20 \$531 8 7 \$7,712 9 10 \$23,674 10 12 \$78,461 11 5 \$62,347 12 9 \$110,923
P4_9 Page 3 the present value interest factor in each of the cases shown in the accompanying table. Compare the calculated value to the table value. Case A PVIF,i,n= 1 0.92 (1+.02)^4 Case B PVIF,i,n= 1 0.83 (1+.10)^2 Case C PVIF,i,n= 1 0.86 (1+.05)^3 Case D PVIF,i,n= 1 0.78 (1+.13)^2 Present value calculation Without referring to tables or to the preprogrammed function on your financial calculator, use the basic formula for present value, along with the given opportunity cost, i, and the number of periods, n, to calculate

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P4_25 Page 4 in the following table, determine the future value at the end of the final year if interest of 12%, assuming that no withdrawals are made during the period. Cash Flow Stream Year Number of Years to Compound FV = CF x FVIF12%,n A 1 3 \$ 900 x1.405 2 2 1,000 x1.254 3 1 1,200 x1.120 Calculator Solution:\$3,862.84 B 1 5 \$ 30,000 x1.762
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