Question

Attempts: Keep the Highest: 12 13. Present value You just found out that you had a very eccentric uncle who lived quietly in the Bronx. He left you $45,000. You just saw the movie The Bucket List and have decided that you want to put some money away so that in 12 years, you can start fulfilling items on that list. with whatever money you have left, you'll pay off some bills. You have found an investment instrument that will pay 7% interest annually Use the scenarios along with the following factor table data to answer each of the questions. Note that the complete Future Value and Future Value Annuity tables (as well as the Present Value and Present Value Annuity tables) are located in the appendix in your text. Factor Tables Table of Present Value Factors Interest Rate Year 9% .596 3W .837 .789 .744 .701 5% 7% 746 666 .677 .582 614 508 557.444 .481 362 377 258 8% 630 .540 463 -397 -502 215

Answer 1

FIRST CASE : PVIF (SIMPLE PV FACTOR)

FUTURE VALUE = 51750

YEARS = 12 , RATE = 7%

PRESENT VALUE = FV X PVIF @7%,2 YEARS

PRESENT VALUE = 51750 X 0.444 = 22977 [ANSWER 1]

SECOND CASE : PVIFA (PRESENT VALUE OF ANNUITY FACTOR)

PRESENT VALUE = PMT X PVIFA @8%,15 YEARS

51750 = PMT X 8.560  =

PMT = 51750/8.560 = 6045.56 [ANSWER 2] [Thumbs up please]