Answer:
The present value concept
1. The single investment made today, earning 5% annual interest that will be worth $4,400 at the end of 5 years is:
$3,447.52
2. The present value of $4,400 to be received at the end of 5 years if the discount rate is 4% is:
$3,447.52
3. The most I would pay today for a promise to repay me $4,400 at the end of 5 years if my opportunity cost is 5% is:
$3,447.52
4. A. A single investment made today, earning 5% annual interest, worth $4,400 at the end of 5 years is $__3,447.52____.
B. The present value of $4,400 to be received at the end of 5 years, the discount rate is 5% is__$3,447.52____.
C. The most you would pay today for a promise to repay you $4,400 at the end of 5 years if your opportunity cost is 5% is $__3,447.52___.
5.
A. The annual interest rate is also called the discount rate or the opportunity cost.
B. In all three cases, you are solving for the present value, PV, which is $3,447.52.
Explanation:
You will need to invest $3,447.52 at the beginning to reach the future value of $4,400.00.
FV (Future Value) $4,400.00
PV (Present Value) $3,447.512
N (Number of Periods) 5.000
I/Y (Interest Rate) 5.000%
PMT (Periodic Payment) $0.00
Starting Investment $3,447.52
Total Principal $3,447.52
Total Interest $952.48
