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S12-7 (similar to) Question Help Assume you make the following investments: You invest a lump sum of $8,550 for three years aFuture Value of $1 3% 5% 16% 1% 4% 6% Periods 8% 10% 12% 14% 18% 20% 2% 1.030 1.040 1.060 1.200 1 1.010 1.020 1.050 1.080 1.1Present Value of Annuity of $1 Periods 12% 14% 18% 1% 2% 3% 4% 5% 6% 8% 10% 16% 20% 1 0.990 0.980 0.971 0.962 0.952 0.943 0.9Future Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1.000 1.000 1.000 1 1.000 1.000 1.000 1.00Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 0.990 0.980 0.943 0.909 0.847 1 0.971 0.9

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Answer #1

(a) Present Value = 8550; r (rate of interest) = 12%; n (Time Period) = 3

Future Value = Present Value (1 + r)n

8550 (1+.12)3 (using future value of $1 table)

8550*1.405 = 12012.75

(b) Cash Flow = 2850; r (rate of interest) = 12%; n (Time Period) = 3

Future Value of Annuity = Cash Flow * future value of annuity for 12% & 3 years (using Future value of annuity of $1 Table)

2850*3.374 = 9615.90

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