The investment future value in terms of purchasing power

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Reference no: EM131949055

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

5 percent for ten years

7 percent for seven years

9 percent for four years

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

What would be the future value of your investment?

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?

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

3. 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.

4. 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?

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

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

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?

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

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?

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

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

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?

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

Reference no: EM131949055

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