Question

7. Compute the future value in year 10 of a $1.000 deposit in year 1 and another $1,500 deposit at the end of year 4 using an 8 percent interest rate. A. $3,120.73 B. $4,379.31 C. $4,500.00 D. $5,397.31 8. What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent? A. $1,917.25 B. $7,002.99 C. $12.720.00 D. $18.620.78 9. What is the present value of a $250 deposit in year 1 and another $50 deposit at the end of year 6 if interest rates are 10 percent? A. $120.00 B. $169.34 C. $255.50 D. $278.22 10. What is the present value of a $300 annuity payment over 5 years if interest rates are 8 percent? A. $204.17 B. $440.80 C. $1,197.81 D. $1,938.96 11. What is the present value, when interest rates are 10 percent of a $75 payment made every year forever? A. $6.75 B. $675.00 C. $750.00 D. $1,000.00 12. If the present value of an ordinary. 4-year annuity is $1,000 and interest rates are 6 percent, what is the present value of the same annuity due? A. $943.40 B. $1,000.00 C. $1,040.00 D. $1,060.00

Answer 1

Future value = present value * (1 + r)ⁿ,

where r = rate of interest,

and n = number of years.

The $1,000 is compounded for 9 years (from end of year 1 to year 10).

Future value = $1000 * (1 + 8%)⁹ = $1,999.00.

The $1,500 is compounded for 6 years (from end of year 4 to year 10).

Future value = $1500 * (1 + 8%)⁶ = $2,380.31.

Total future value =  $1,999.00 + $2,380.31 = $4,379.31.