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Chapter 4: Q4BP-a (page 282)
You will receive \(6,800 three years from now. The discount rate is 10 percent.
a. What is the value of your investment two years from now? Multiply \)6,800 3 (1/1.10) or divide by 1.10 (one year’s discount rate at 10 percent).
The value of investment after two years is $6,181.82.
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How is the future value related to the present value of a single sum?
Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is
a. 5 percent.
b. 15 percent.
If you invest $8,500 per period for the following number of periods, how much would you have? b. 50 years at 9 percent.
You invest \(3,000 for three years at 12 percent.Combine these steps using the formula FV 5 PV 3 (1 1 i) n to find the future value of \)3,000 in 3 years at 12 percent interest.
What is the present value of
b. $16,600 in 5 years at 9 percent?
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