Question

Answer A-D using time value of money tables

signment X kap1965X_ex01A.jpg (1310x17 x kap1965X_ex01A.jpg (1310 17 x kap /Media/Connect_Production/bne/finance/kapoor 6e/kap1965X_ex01A.jpg Exhibit 1 -Arture Value (Compounded Sum) of s ur Give Number of time periode iiiiiii 25 15% 16%

Answer 1

a) here present value = PV = 550$

n = no. of period = 6 years

R = Rate of interest = 7%

Future value = PV(1+r)^n

=550(1+0.07)^6

=550(1.07)^6

=550(1.501)

=825.40$

b)

Here Annuity = 700$

n = no. of period = 10 years

R = Rate of interest = 8%

Future value of annuity = Annuity[(1+r)^n - 1 /r]
=700[(1+0.08)^10 - 1 /0.08]
=700[(1.08)^10-1/0.08]
=700[(2.158925-1/0.08]
=700(1.158925/0.08)
=700(14.487)
=10140.59$

C)

Here Future value = 1000$

n = no. of period = 5 years

R = Rate of interest = 5%

Future value = PV(1+r)^n
=1000 = PV(1+0.05)^5
1000 = PV(1.05)^5
1000 = PV(1.276)
PV = 784 $
Thus one has to invest $784 today to get $1000 after 5 years

D)

Here Annuity= 500$

n = no. of period = 10 years

R = Rate of interest = 8%

Present value of annuity = Annuity[1-(1/(1+r)^n / r ]
=500[1-(1/(1+0.08)^10 / 0.08]
=500[1-(1/(1.08)^10 / 0.08]
=500[1-0.46319 / 0.08]
=500[0.536807/0.008]
=500[6.710]
=3355 $