Question

An amount of money will be 15000 at an inerest rate of 10%. How much is its present value if it will be received in 10 years?

8,220

5,783

6,540

7,200

6,800

answer not here

What is the future value of a 15000 investment today if for the next 4 years the interest rate is 5%, then 8% for the following 5 years, and 10% for the last 6 years?

Answer 1

Answer

PV=FV*(1+i)^(-n)

FV=15000

PV=?

i=10%

n=10

PV=15000*(1.1^-10)

=5783.14934

The present value is $5783.14934

option 2, $5783

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the interest rate is changing so the formula is

FV=PV*(1+i)^(ni) *(1+j)^(nj) *(1+k)^(nk)

i,j,k are interest rates and ni, nj, nk are periods of each interest rates

PV=15000

FV=15000*(1.05^4)*(1.08^5)*(1.1^6)

=47459.5202

the future value is $47459.52