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Present Value, Future Value and Interest Review Worksheet

Present Value, Future Value, And Interest Review Worksheet

 

1. Angela deposits $2000 into her bank account today. After 10 years she is expected to have $4317.85 in her bank account. If interests are compounded annually, what would be the interest rate?

2. The maturing value of a fund is $10,000. The term is 6 years at 5% per annum compounded semi-annually. What is the present value of the fund?

3. If you plan to invest $1000, which of the following would be the best investment based on the rate of return? Show your calculations.

a. Compounded annually at 7% for 5 years

b. Compounded quarterly at 6.8% for 5 years

c. Compounded monthly at 6.75% for 5 years

4. What is the future value of an investment if $1000 is deposited now, $2000 is deposited two years from now, $4000 is deposited 5 years from now, and the maturity date is 7 years from now? Assume the interest rate is 6% per year compounded annually.

5. What is the difference of the interest in dollar amount if the following investment is calculated using simple interest and compound interest?

                        Principal: $5000

                        Time Period:  3 years

                        Interest rate:  5% /a (compounded annually for compound interest)

6. Paul agreed to pay me $4000 for an investment that is due 5 years from now. The maturity value of the investment is $6250 with terms 10% / a compounded quarterly. Should I accept the offer? Show your calculation.

 

Answers:

 

1. 8% per annum

2. $7435.56

3. $1402.55; $1400.94; $1400.11; compounded annually at 7% for 5 years

4. $8674.48

5. $38.13

6. PV = $3814.19; I should accept the offer

 

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