Scribd
Upload
63 views

Chapter 1 - Exercise

1. The document provides 3 exercises to calculate present and future values using different interest rates compounded annually, semiannually, and quarterly over periods of 2 to 4 years and 10 to 20 years in the future. 2. The first section includes 3 exercises calculating present values of receiving single amounts in the future at 8-10% interest rates. 3. The second section includes 3 parallel exercises calculating future values of today's deposits earning 8-10% interest over 2-4 years into the future.

Uploaded by

Phartheben Selvam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
63 views

Chapter 1 - Exercise

1. The document provides 3 exercises to calculate present and future values using different interest rates compounded annually, semiannually, and quarterly over periods of 2 to 4 years and 10 to 20 years in the future. 2. The first section includes 3 exercises calculating present values of receiving single amounts in the future at 8-10% interest rates. 3. The second section includes 3 parallel exercises calculating future values of today's deposits earning 8-10% interest over 2-4 years into the future.

Uploaded by

Phartheben Selvam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

CHAPTER 1: EXERCISE.

Present Value

So $1,000 now is the same as $1,100 next year (at 10% interest).

Instruction: Complete these questions by showing the workings.

1. Exercise #1.
Let's assume we are to receive $100 at the end of two years. How do we calculate the
present value of the amount, assuming the interest rate is 8% per year compounded
annually?

2. Exercise #2.
We need to calculate the present value (the value at time period 0) of receiving a single
amount of $1,000 in 20 years. The interest rate for discounting the future amount is
estimated at 10% per year compounded annually.

3. Exercise #3.
What is the present value of receiving a single amount of $5,000 at the end of three years,
if the time value of money is 8% per year, compounded quarterly?

Future Value
Exercise #1.
You make a single deposit of $100 today. It will remain invested for 4 years at 8% per
year compounded annually. What will be the future value of your single deposit at the end of 4
years?

Exercise #2.
Paul makes a single deposit today of $200. The deposit will be invested for 3 years at an interest
rate of 10% per year compounded semiannually. What will be the future value of Paul's account
at the end of 3 years?

Exercise #3.
Sheila invests a single amount of $300 today in an account that will pay her 8% per
year compounded quarterly. Compute the future value of Sheila's account at the end of 2 years.

You might also like