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Capstone CheckPoint Chrissy Weeks FIN/200 Richard Webb March 23, 2012 a. If you invest $9,000 today, how much will you have in? 3 years @ 7% FV = 9,000; rate = 7%; N = 3 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 1.449 = $13,041 8 years @ 10% FV = 9,000; rate = 10%; N = 8 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 2.5937 = $23,343.30 30 years @ 15% FV = 9,000; rate = 15%; N = 30 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 66.2118 = $595,906.20 20 years @ 20% compounded semi-annually FV = 9,000; rate = 20%; N = 20 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 38.34 = $345,060.00 b. What is the present value of the following amounts, promised in the stated number of years, assuming the stated discount rates? $10,000 in 9 years @ 8% FV = 10,000; rate = 8%; N = 9 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.50025 = $5,002.50 $10,000 in 9 years @ 9% FV = 10,000; rate = 9%; N = 9 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.46043 = $4,604.30 $10,000 in 12 years @ 10% FV = 10,000; rate = 10%; N = 12 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.31863 = $3,186.30 $10,000 in 15 years @ 11% FV = 10,000; rate = 11%; N = 15 years; PV =? PV = FV x PVIF8%, 1 year = 10,000 x 0.20900 = $2,090.00 c. Your uncle offers you a choice of $25,000 in 50 years or $95 today? If money is discounted at 12%, which should you choose? Option 1: FV = 25,000; rate = 12%; N = 50 years; PV =? PV = FV x PVIF8%, 1 year = 9,000 x 2.211 PV= $86.50 Option 2: $95.00 I would choose the second option of $95.00. c. Your aunt offers you a choice of $30,000 in 25 years or $850 today? If money is discounted at 11%, which should you choose? Option 1: FV = 30,000; rate = 11%; N = 25 years; PV =? PV = FV x PVIF8%, 1 year 30,000 x 0.073608 PV= $2,208.24 Option 2: $850.00 I would choose the first option of $2,208.24. ... View Full Document
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