John J. Wild, Financial Accounting: Information for Decisions, 8th Edition
B-1
APPENDIX B
APPLYING PRESENT AND FUTURE VALUES
Related Assignment Materials
Student Learning Objectives
Quick Studies*
Exercises*
Conceptual objectives:
C1. Describe the earning of interest
and the concepts of present and
future values.
B-1
B-11, B–19
Procedural objectives:
P1. Apply present value concepts
to a single amount by using
interest tables.
B-2, B-3, B-4
B-1, B-2, B-12, B-13, B-18, B-19
P2. Apply future value concepts to
a single amount by using
interest tables.
B-5
B-3, B-4, B-5, B-6, B-17, B-18, B-19
P3. Apply present value concepts
to an annuity by using interest
tables.
B-6
B-7, B-8, B-9, B-10, B-11, B-12, B-13,
B-18, B–19
P4. Apply future value concepts to
an annuity by using interest
tables.
B-7
B-14, B–15, B-16, B-17, B-18, B-19
Additional Information on Related Assignment Material
Connect
Available on the instructor’s course-specific website) repeats all numerical Quick Studies, all Exercises and
Problems Set A. Connect also provides algorithmic versions for Quick Study, Exercises and Problems. It allows
instructors to monitor, promote, and assess student learning. It can be used in practice, homework, or exam mode.
Connect Insight
The first and only analytics tool of its kind, Connect Insight is a series of visual data displays that are each framed
John J. Wild, Financial Accounting: Information for Decisions, 8th Edition
B-2
Appendix Outline
I. Present Value and Future Value Concepts
A. As time passes, certain assets and liabilities that are held grow.
II. Present Value of a Single Amount
A. The present value of a single amount received at a future date is
the amount that can be invested now at the specified interest rate
to yield that future value.
II. Future Value of a Single Amount
A. The future value of a single amount invested at a specified rate of
interest is the amount that would accumulate by the future date.
III. Present Value of an Annuity
A. An ordinary annuity is defined as equal end-of-period payments at
equal intervals.
B. The present value of an annuity is the amount that can be invested
IV. Future Value of an Annuity
A. The future value of an annuity invested at a specified rate of
interest is the amount that would accumulate by the date of the
final payment.
Notes
John J. Wild, Financial Accounting: Information for Decisions, 8th Edition
B-3
Alternate Demonstration Problem
Appendix B
Sarah Blue has the three options:
1. Receiving $1,000 per year for the next 10 years:
Assuming that the current interest rate is 10%, and that Blue wants the
option that yields the highest present value, which option should she
choose?
John J. Wild, Financial Accounting: Information for Decisions, 8th Edition
Solution: Alternate Demonstration Problem
Appendix B
The present value of $1,000 received annually for 10 years discounted at