(A) Present Value: Fill in the present values for the following table using the method below;

PV = PF * 1/(1+r) raised to power n

Future value ($) Interest rate Periods (years) Present value

753.00 3.5% 2 ?

89, 383.00 6.5% 32 ?

339, 984.00 10.5% 24 ?

26, 837.48 17. 5% 10 ?

(B) Present value with changing years: When they are born, their grandma gives each of her grand children $2, 000 savings bond that mature in 18 years. For each of the following grandchildren, what is the present value of each savings bonds if the current discount rate is 7%;

(i) Seth turned 16 years old today

(ii) Shawn turned 11 years old today

(III) Sherry turned 10 years old today

(iv) Shane has just been born.

(C) With changing interest rates, Marty has been offered an injury settlement of 10, 000 payable in 3 years. He wants to know what the present value of the injury settlement is if his opportunity cost is 3. 5% (interest rate). What if the opportunity cost is 7% and what if it is 10%.

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- Please go through the (B) part of the question again...it is one interest rate of 7% for all, so I do not understand how you got the respective interest rates for the four different children. Please correct the computation. Thanks.
- Alanhurvitz
- Jul 19, 2016 at 8:31pm

- Sorry for that
- ProfMT
- Jul 19, 2016 at 8:58pm

- $1,746.88 $1,245.50 $1,164.02 $591.73
- ProfMT
- Jul 19, 2016 at 8:58pm

- Those are the values. In the excel, you could input 7% and the values will change automatically.
- ProfMT
- Jul 19, 2016 at 8:59pm

- I had used rates in question 1 which are wrong.
- ProfMT
- Jul 19, 2016 at 9:00pm