Time Value of Money Problems
Example
Future Value of a PRESENT Lump Sum
What will $8,000 accumulate to when invested for 10 years at 10%?
Sum Invested
Tme Invested (years)
Interest rate (%)
FVIF
Future Value (FV)
$5,000
10
10%
2.594
$12,970
(Using Financial Tables)
$5,000
10
10%
$12,969
(Using Excel Function)
Example
Present Value of a FUTURE Lump Sum
What is the Present Value of $1,000 to be received in 8 years from now, discounted back to the present at 3%.
Sum Invested
Years Discounted
Interest rate (%)
PVIF
Present Value (PV)
$1,000
8
3%
0.789
$789
(Using Financial Tables)
$1,000
8
3%
$789
(Using Excel Function)
Example
Future Value of an Annuity (FVA)
What is the Future Value Annuity (FVA) of $100 deposited each year for 5 years, with an interest rate of 10%
Payment (PMT)
Duration of Annuity (Years)
Compound Interest Rate
FVIFA
Future Value Annuity (FVA)
$100
5
10%
6.105
$610.50
(Using Financial Tables)
$100
5
10%
$610.51
(Using Excel Function)
Example
What is the Present Value Annuity of $2,500 for 10 years discounted back to the present at 7%?
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 Winter '08
 JONES
 Time Value Of Money, Future Value, Interest, Interest Rate, financial tables, Tme Invested

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