# Compounding annually

• Mar 30th 2013, 05:36 AM
jewel1877
Compounding annually
Problem-solving: Assuming zero taxes, calculate the present value of a \$1000 of future income, compounded annually, to be received at the end of: a) one year, using a discount rate of 5%;
b) one year, using a discount rate of 10%;
c) five years, using a discount rate of 5%;
d) five years, using a discount rate of 10%;
e) twenty years, using a discount rate of 20%.

I think I am over complicating this because i freak out when it comes to math.
• Mar 30th 2013, 05:49 AM
MINOANMAN
Re: Compounding annually
Don't get upset...just study...get the compound interest formula ...AVAILABLE IN all algebra books...Vn = V0( 1+ r/100)^n
Vn the value after n years...Vo the value today..r/100 = rate/100.......
MINOAS
• Mar 30th 2013, 05:58 AM
jewel1877
Re: Compounding annually
The equation for the simple interest is FVn = PV ( 1+ i ). Where FVn is the Future value at the end of a specific time period, PV is the present value and i is the interest rate.

this what I have as the formula
• Mar 30th 2013, 06:08 AM
MINOANMAN
Re: Compounding annually
ok ..then at the end of the first year this formula will give you the FV for 1 year but what is you have 2,3 4,....n years

then PVn=pPV(1+r/100)^n.... where n is 1,2,3,4.....n years....