Present Value for Various Compounding Periods
Find the present value of $500 due in the future under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.
a)
Future Value (FV) |
$500 |
Interest Rate - Semi-annual (i) |
4percent / 2 = 2 percent (half-yearly) |
Number of Periods (n) |
5 years x 2 = 10 periods |
According to Problem:
Therefore, PRESENT VALUE = $410.17
b)
Future Value (FV) |
$500 |
Interest Rate – Quarterly Compounded (i) |
4percent / 4 = 1 percent (per quarter) |
Number of Periods (n) |
5 years x 4 = 20 periods |
According to Problem:
Therefore, PRESENT VALUE = $409.77
c)
Future Value (FV) |
$500 |
Interest Rate – monthly compounded (i) |
4percent / 12 = 0.33% percent (per month) |
Number of Periods (n) |
1 year x 12 = 12 periods |
According to Problem:
Therefore, PRESENT VALUE = $480.62
Present Value for Various Compounding Periods Find the present value of $500 due in the future...
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