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**Unformatted text preview: **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.
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