Question

please help with questions 14-15 and 16...

14-what will $9000 deposited into a bank today be worth 6 years from now assuming you earn 5% interest? 15- what will the $3000 you deposit EVERY year (annually) be worth at the end of 20 years assuming you earn 6%? 16-if you are promised $80,000 to be received 6 years from now, assuming 5% interest, what amount would you accept today instead of the future payment?

Answer 1

14.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=9000*(1.05)^6

=9000*1.34009564

=12060.86(Approx).

15.Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=3000[(1.06)^20-1]/0.06

=3000*36.7855912

=110356.77(Approx)

16.Present value=80,000*Present value of discounting factor(rate%,time period)

=80,000/1.05^6

=80,000*0.746215397

=59697.23(Approx).