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Unformatted text preview: FV = 5,000; rate = 8%; N = 3 years; PV =? PV = FV x PVIF8%, 3 year = 5,000 x 0.794 = $3,970 4. If you invest $9,000 today, how much will you have: a. In 2 years at 9 percent? PV = 9,000; rate = 9%; N = 2 years FV = PV x FVIF9%, 2 years = 9,000 x 1.188 = $10,692 b. In 7 years at 12 percent? PV = 9,000; rate = 12%; N = 7 years FV = PV x FVIF12%, 7 years = 9,000 x 1.188 = $10,692 c. In 25 years at 14 percent? PV = 9,000; rate = 9%; N = 2 years FV = PV x FVIF9%, 2 years = 9,000 x 2.211 = $19,899 d. In 25 years at 14 percent (compounded semiannually)? PV = 9,000; rate = 14%; N = 25 years FV = PV x FVIF14%, 25 years = 9,000 x 26.461 = $238,149 5. Your uncle offers you a choice of $30,000 in 50 years or $95 today. If money is discounted at 12 percent, which should you choose? Option 1: FV = 30,000; N = 50 years; Rate = 12% PV = FV x PVIF12%, 50 years = 30,000 x 0.003 = $90 Option 2: PV = $95 Choose the second option accepting $95 today...
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 Spring '10
 Professor
 Net Present Value

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