Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Problem: A Person decided to save some money
Problem: A Person decided to save some money. Let's say he will deposit $1000 in one year, and $2000 in two years. The interest rate is 10%. a) Find Present Value b) Find Future Value
Expert Solution
Person deposits money for 2 years only
a) Present value
As amount is deposited at the end of the year, we have to discount both year deposits to arrive at Present value
Present value = 1000 x PVIF @10%, 1 year + 2000 x PVIF @10%, 2 years
Present value = 1000 x 1/(1+0.10)^1 + 2000 x 1/(1+0.10)^2
Present value = 1000 x 0.909091 + 2000 x 0.826446 = 909.091 + 1652.892 = 2561.98
ANSWER : 2561.98
b) Future value
As amount is deposited at the end of the year, 1000 will get one year interest but 2000 will not get any interest as it is deposited at the end of year 2.
Future value = 1000 x (1+0.10) + 2000 = 3100
ANSWER : 3100
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
