Question

Please show your work. If you are using a calculator or the app just list the steps. If you use Excel just upload your file.

1. You invest $25,000 today at 8% per year. How much money will you have accumulated after 13 years?

2. You are going to receive $150,000 in 25 years. Calculate the present value of the $150,000 using discount rates of 8% and 10%.

3. Your friend has learned that he is going to receive $7,500 a year for the next 10 years. Utilizing 5% interest rate, calculate the current value of the future payments.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Answer 2 Part 1) 3 Accumulated amount = investment* (1+i)^n 4 = 225000*(1.08)^13 5 = $ 611915.34 (rounded off to 2 decimal places) 7 Thus the correct answer is $ 611915.34 9 Part 2) 10 Present Value = amount to be received/ (1+i)^n 12 a) n=8% 13 Present Value = 150000/(1.08)^25 14 = $ 21902.69 (rounded off to 2 decimal places) 15 16 Thus the correct answer is $ 21902.69 18 b) n= 10% 19 Present Value = 150000/(1.10)^25 20 = $ 13844.4 (rounded off to 2 decimal places) 22 Thus the correct answer is $13844.4 23 24 Part 3) 25 Present Value = annual Payment * Present value annuity (5%, 10) 26 = 7500*((1-(1.05)^-10)/.05) 27 = 7500*7.721735 28 = $ 57913.01 (rounded off to 2 decimal places) 30 Thus the correct answer is $ 57913.01