Question

10. Problem 5.10 (Present and Future Values for Different Interest Rates) eBook Find the following values. Compounding/discounting occurs annually. Do not round intermediate calculations. Round your answers to the nearest cent. a. An initial $800 compounded for 10 years at 8%. b. An initial $800 compounded for 10 years at 16%. c. The present value of $800 due in 10 years at 8%. $ d. The present value of $2,300 due in 10 years at 16% and 8%. Present value at 16%: $ Present value at 8%:$ e. Define present value. I. The present value is the value today of a sum of money to be received in the future and in general is less than the future value. II. The present value is the value today of a sum of money to be received in the future and in general is greater than the future value. III. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value. IV. The present value is the value in the future of a sum of money to be received today and in general is less than the future value. V. The present value is the value in the future of a sum of money to be received today and in general is greater than the future value. -Select- :) How are present values affected by interest rates? -Select-

Answer 1

I'm allowed to solve only 4 subparts in one question, you can surely ask the others in a different question.

a. Amount = 800 * 1.08^10 = 1,727.14

b. Amount = 800 * 1.16^10 = 3,529.15

c. PV = 800 / 1.08^10 = 370.55  

d. PV at 16% = 2300/1.16^10 = 521.37

PV at 8% = 2300 / 1.08^10 = 1,065.35

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