Answer:
1. The Present value on January 1, 2016 of $30,000 due on January 1, 2021 and discounted at 12% is:
$17,022.80
2. The present value on July 1, 2016 of $8,000 due January 1, 2021, and discounted at 16% compounded quarterly is:
$3,949.02
3. The amount of the present value discount (the difference between future value and present value on $8,000 due at the end of 5 years at 10% compounded annually is:
$3,032.63
Explanation:
You will need to invest $17,022.80 at the beginning to reach the future value of $30,000.00.
FV (Future Value) $30,000.00
PV (Present Value) $17,022.80
N (Number of Periods) 5.000
I/Y (Interest Rate) 12.000%
PMT (Periodic Payment) $0.00
Starting Investment $17,022.80
Total Principal $17,022.80
Total Interest $12,977.19
2. You will need to invest $3,949.02 at the beginning to reach the future value of $8,000.00.
FV (Future Value) $7,999.99
PV (Present Value) $3,949.02
N (Number of Periods) 18.000
I/Y (Interest Rate) 4.000%
PMT (Periodic Payment) $0.00
Starting Investment $3,949.02
Total Principal $3,949.02
Total Interest $4,050.97
Total Interest $7,446.85
You will need to invest $4,967.37 at the beginning to reach the future value of $8,000.00.
FV (Future Value) $8,000.00
PV (Present Value) $4,967.37
N (Number of Periods) 5.000
I/Y (Interest Rate) 10.000%
PMT (Periodic Payment) $0.00
Starting Investment $4,967.37
Total Principal $4,967.37
Total Interest $3,032.63
