Appendix B – Applying Present and Future Values
Appendix B
Applying Present and Future Values
QUICK STUDIES
Quick Study B-1 (10 minutes)
1.
2%
2.
12%
3.
3%
4.
1%
Quick Study B-2 (10 minutes)
Quick Study B-3 (10 minutes)
Quick Study B-4 (10 minutes)
Quick Study B-5 (10 minutes)
Quick Study B-6 (10 minutes)
Quick Study B-7 (10 minutes)
Exercise B-1 (10 minutes)
Exercise B-2 (10 minutes)
Exercise B-3 (10 minutes)
Exercise B-4 (10 minutes)
Exercise B-11 (15 minutes)
Amount borrowed =
present value of $20,000 at 10% for 3 years
=
$20,000 x 0.7513 (using Table B.1, i = 10%, n = 3)
=
$15,026
Exercise B-12 (10 minutes)
a. p = present value of $60,000 at 9% for 4 years
p = $60,000 x 0.7084
p = $42,504
b. p = present value of $15,000 at 8% for 2 years
Exercise B-13 (Continued)
2.
First Annuity
Payment size …………………………….…..
$ 5,000
Number of payments ……………………..
6
Interest rate …………………………………..
6%
Value from Table B.3 ……………………..
4.9173
Present value of the annuity ……..…..
$24,587
(difference from part (1) due to rounding)
Second Annuity
Payment size …………………………….…..
$ 7,500
Number of payments ……………………..
4
Interest rate …………………………………..
6%
Value from Table B.3 ……………………..
3.4651
Present value of the annuity ……..…..
$25,988
(difference from part (1) due to rounding)
Exercise B-14 (30 minutes)
1. Present value of the annuity
Payment size …………………………….…..
$13,000
Number of payments ……………………..
4
Interest rate …………………………………..
4%
(semiannual)
Value from Table B.3 ……………………..
3.6299
Present value of the annuity ……..…..
$47,189
2. Present value of the annuity
Payment size …………………………….…..
$13,000
Number of payments ……………………..
4
Interest rate …………………………………..
6%
(semiannual)
Value from Table B.3 ……………………..
3.4651
Present value of the annuity ……..…..
$45,046
3. Present value of the annuity
Payment size …………………………….…..
$13,000
Number of payments ……………………..
4
Interest rate …………………………………..
8%
(semiannual)
Value from Table B.3 ……………………..
3.3121
Present value of the annuity ……..…..
$43,057
Exercise B-19 (20 minutes)
a. (1) Present Value of a single amount.
(2) Multiply $10,000 by p from Table B.1.
(3) Use Table B.1, periods = 8 and interest rate = 4%.
OR
(1) Future Value of a single amount.