Capstone checkpoint fin200

Capstone checkpoint fin200 - of $1) for n = 3 and i = 8%....

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Running head: CAPSTONE CHECKPOINT: PRESENT VALUE, FUTURE VALUE, 1 Capstone Checkpoint: Present Value, Future Value, and Annuity Nikki Vergets Fin/200 5/26/11 John Simulcik
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CAPSTONE CHECKPOINT: PRESENT VALUE, FUTURE VAULE, 2 Capstone Checkpoint: Present Value, Future Value, and Annuity 1. You will receive $5,000 three years from now. The discount rate is 8 percent. a . What is the value of your investment two years from now? Multiply $5,000 × .926 (one year’s discount rate at 8 percent) $5000*0.926 = $4630.00 b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one year’s discount rate at 8 percent). $4630*0.926= $4287.38 c . What is the value of your investment today? Multiply your answer to part b by .926 (one year’s discount rate at 8 percent). $4287*0.926= $3970.11 d . Confirm that your answer to part c is correct by going to Appendix B (present value
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Unformatted text preview: of $1) for n = 3 and i = 8%. Multiply this tabular value by $5,000 and compare your answer to part c . There may be a slight difference due to rounding. PV = 5,000 x 0.794= $3,970 2. If you invest $9,000 today, how much will you have: a . In 2 years at 9 percent? FV2 = $9000*1.188= $10,692 b. In 7 years at 12 percent? FV7= $9000*2.211= $19,899 c. In 25 years at 14 percent? FV25= $9000*26.462= $238,158 d. In 25 years at 14 percent (compounded semiannually)? FV25 (if interest is compounded semiannually) = $9000*29.457 = $265,113 CAPSTONE CHECKPOINT: PRESENT VALUE, FUTURE VAULE, 3 3. 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? $30,000 / (1.12) 50 = 30,000 / 289 = $103.81 I would choose $30,000 in 50 years because it has higher present value than only taking $95 today....
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This note was uploaded on 06/04/2011 for the course FIN 200 FIN 200 taught by Professor Smith during the Spring '10 term at University of Phoenix.

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Capstone checkpoint fin200 - of $1) for n = 3 and i = 8%....

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