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Homework+File+2+Week+3

# Homework+File+2+Week+3 - Time Value of Money Problems...

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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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Homework+File+2+Week+3 - Time Value of Money Problems...

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