Question

11 points value a. The cost ot a new automobile is $11,500 It the interest rate is 8%, how much would you have to set aside now to provide this sum in eight years? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value 6216.20 b. You have to pay $10,000 a year in school fees at the end of each of the next nine years, if the interest rate is 11%, how much do you need to set aside today to cover these bills? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Present value I С You have invested $90 000 at 11%. A er paying the above sch00 fees, how much would remain at the end ofthe nine years? o no round intermediate calculat ns. Round o rans vero decimal places.) Future value ReferenceseBook & Resources

Answer 1

1)
	a.	Present Value		$       6,213.09
		Working:
		# 1	Present value of 1	=	(1+i)^-n		Where,
				=	(1+0.08)^-8		i	8%
				=	0.540269		n	8
		# 2	Present Value	=	$           11,500	*	0.540269
				=	$       6,213.09
	b.	Present Value		$     63,676.05
		Working:
		# 1	Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
				=	(1-(1+0.11)^-9)/0.11		i	11%
				=	5.537048		n	9
		# 2	Present Value	=	$           11,500	*	5.537048
				=	$     63,676.05
	c.	Future Value		$ 2,30,223.32
		Working:
		# 1	Future Value of 1	=	(1+i)^n		Where,
				=	(1+0.11)^9		i	11%
				=	2.55804		n	9
		# 2	Future Value	=	$           90,000	*	2.55804
				=	$ 2,30,223.32