1. Present and Future Values for Different Periods
Find the following values using the equations and then a finance calculator. Compounding/discounting occurs annually.
a. An initial $200 compounded for 1 year at 6%.
b. An initial $600 compounded for 2 years at 6%.
c. The present value of $600 due in 1 year at a discount rate of 6%.
d. The present value of $600 due in 2 years at a discount rate of 6%.
2. Present and Future Values for Different Interest Rates
Find the following values. Compounding/discounting occurs annually.
a. An initial $200 compounded for 10 years at 4%.
b. An initial $200 compounded for 10 years at 8%.
c. The present value of $200 due in 10 years at 4%.
d. The present value of $1,870 due in 10 years at 8% and at 4%.
e. Define present value and illustrate it using a time line with data from part d. How are present values affected by interest rates?