# 2024 – 2 Find the future value of 10 000 invested now after five years if the annual interest rate is 8 percent

fin100 wk4 P2, P3, P4, P5, P7, P16, P17, P19 – 2024

2024 – 2 Find the future value of 10 000 invested now after five years if the annual interest rate is 8 percent.

2. Find the future value of \$10,000 invested now after five years if the annual interest rate is 8 percent.

a.What would be the future value if the interest rate is a simple interest rate?b.What would be the future value if the interest rate is a compound interest rate?

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3. Determine the future values if \$5,000 is invested in each of the following situations:

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4. You are planning to invest \$2,500 today for three years at a nominal interest rate of 9 percent with annual compounding.

a.What would be the future value of your investment?

b.Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment’s future value in terms of purchasing power?

c.What would be the investment’s future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?

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5. Find the present value of \$7,000 to be received one year from now, assuming a 3 percent annual discount interest rate. Also calculate the present value if the \$7,000 is received after two years

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7. Determine the present value if \$15,000 is to be received at the end of eight years and the discount rate is 9 percent. How would your answer change if you had to wait six years to receive the \$15,000?

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16. Use a financial calculator or computer software program to answer the following questions:

## Earns interest

a.What would be the future value of \$15,555 invested now if it earns interest at 14.5 percent for seven years?

b.What would be the future value of \$19,378 invested now if the money remains deposited for eight years and the annual interest rate is 18 percent?

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17. Use a financial calculator or computer software program to answer the following questions:

## Discount rate

a.What is the present value of \$359,000 that is to be received at the end of 23 years if the discount rate is 11 percent?

b.How would your answer change in (a) if the \$359,000 is to be received at the end of 20 years?

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19. Use a financial calculator or computer software program to answer the following questions.

## Money remains deposited

a.What would be the future value of \$19,378 invested now if the money remains deposited for eight years, the annual interest rate is 18 percent, and interest on the investment is compounded semi-annually?

b.How would your answer for (a) change if quarterly compounding were used?

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