# present value

• Sep 27th 2008, 05:25 PM
euclid2
present value
1. Calculate the present value for each section using compound interest. A) You need $1,000 in 8 years. You can invest your money at 3%/a compounded semiannually. B) You need$200 in 30 months. You can invest your money at 6%/a compounded monthly.
C) You need $15,000 in 12.5 years. You can invest your money at 4%/a compounded quarterly. • Sep 27th 2008, 06:57 PM Shyam Quote: Originally Posted by euclid2 1. Calculate the present value for each section using compound interest. A) You need$1,000 in 8 years. You can invest your money at 3%/a compounded semiannually.

A) Future value, F = $1000 interest, $i = \frac{3}{2} \% = 0.015$ number of interest periods, $n = 8 \times 2 = 16$ Present value, P = ? Future value, $F = (1+i)^n.P$ Present value, $P = \frac {F}{(1+i)^n}$ $P = \frac {1000}{(1.015)^{16}}$ Now, finish up. • Sep 27th 2008, 06:59 PM Shyam Quote: Originally Posted by euclid2 1. Calculate the present value for each section using compound interest. B) You need$200 in 30 months. You can invest your money at 6%/a compounded monthly.

B) Future value, F = $200 interest, $i = \frac{6}{12} \% = 0.005$ number of interest periods, $n = 30$ Present value, P = ? Future value, $F = (1+i)^n.P$ Present value, $P = \frac {F}{(1+i)^n}$ $P = \frac {200}{(1.005)^{30}}$ Now, finish up. • Sep 27th 2008, 07:01 PM Shyam Quote: Originally Posted by euclid2 1. Calculate the present value for each section using compound interest. C) You need$15,000 in 12.5 years. You can invest your money at 4%/a compounded quarterly.

C) Future value, F = \$15,000

interest, $i = \frac{4}{4} \% = 1\% = 0.01$

number of interest periods, $n = 12.5 \times 4 = 50$

Present value, P = ?

Future value, $F = (1+i)^n.P$

Present value, $P = \frac {F}{(1+i)^n}$

$P = \frac {15000}{(1.01)^{50}}$

Now, finish up.