CHAPTER 9
TIME VALUE OF MONEY
9.1
To find the future value of a current present value, use FV
n
= PV x FVIF
n,i
.
BY TABLE
(a) FV
10
= $2,000 x FVIF
10,8%
= $2,000 x 2.159 = $4,318
(b) FV
40
= $2,000 x FVIF
40,2%
= $2,000 x 2.208 = $4,416
(c) FV
40
= $2,000 x FVIF
40,3%
= $2,000 x 3.262 = $6,524
BY FINANCIAL CALCULATOR
(a)
$4317.85
(b)
$4416.07
(c)
$6524.07
(d)
$6638.92
(e)
$6640.00
9-2
To find the future value of an annuity, use FVA = CF x FVAIF
n,i
.
(a)
FVA = $3,000 x FVAIF
10,8%
= $3,000 x 14.487 = $43,461
(b)
FVA = $1,500 x FVAIF
20,4%
= $1,500 x 29.778 = $44,667
(c)
FVA = $
100 x FVAIF
120,.667%
= $ 18294.60 (by financial calculator)
9-3
To find the present value of a future value, use PV = FV x PVIF
n,i
.
(a)
PV = $1,000 x PVIF
10,6%
= $1,000 x 0.558 = $
558
(b)
PV = $2,000 x PVIF
10,3%
= $2,000 x 0.744 = $1,488
(c)
$1215.58 (by financial calculator)
9-4
To find the present value of an annuity, use PVA = CF x PVAIF
n,i
.
(a)
PVA = $2,000 x PVAIF
10,8%
= $2,000 x 6.71
= $13,420 and by financial
calculator, $13420.16
(b)
PVA = $2,000 x PVAIF
20,5%
= $2,000 x 12.462 = $24,924 and by financial
calculator, $24924.42
(c)
PVA = $3,000 x PVAIF
48,1%
or by financial calculator, $113921.88.
9.5
ANNUAL COMPOUNDING