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Present and future values for different interest rates find the following values. compounding/discounting occurs annually. round your

Please find below the present and future values for different interest rates. Compounding and discounting occur annually. Round your answers to the nearest cent.

  1. Calculate the future value of an initial investment of $700 compounded for 10 years at an interest rate of 8%.
  2. Calculate the future value of an initial investment of $700 compounded for 10 years at an interest rate of 16%.
  3. Determine the present value of $700 due in 10 years at a discount rate of 8%.
  4. Determine the present value of $2,800 due in 10 years at a discount rate of 16%.
  5. Determine the present value of $2,800 due in 10 years at a discount rate of 8%.

Also, please define present value. The present value represents the value today of a sum of money to be received in the future. In general, it is less than the future value.

How are present values affected by interest rates? - Assuming positive interest rates, will the present value increase as the interest rate increases? - Will the present value decrease as the interest rate increases? - Will the present value decrease as the interest rate decreases? - Will the present value remain unchanged as the interest rate increases? - Will the present value remain unchanged as the interest rate decreases?

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Anonymous

Jan 21, 2025

Instructions are listed below.Explanation:Giving the following information: Final value formula: FV= PV*(1+i)^nPresent value formula:PV= FV/(1+i)^nA) An initial $700 compounded for 10 years at 8%.FV= 700*(1+0.08)^10= $1,511.25 B) An initial $700 compounded for 10 years at 16%.FV= 700*(1.16)^10= $3,088C) The present value of $700 due in 10 year at a discount rate of 8%.PV= 700/(1.08)^10= $324.24D) The present value of $2,800 due in 10 years at 16%.PV= 2,800/1.16^10= $634.71E) The present value of $2,800 due in 10 years at 8%.PV= 2,800*(1.08)^10= $1,296.94F) To define the present value we need to know one important principle. 1 dollar today is better than 1 dollar tomorrow.This is because of the opportunity cost of money. If I get one dollar today, I can invest it and gain by the passing of time more than if I invest it tomorrow. Therefore, the present value is:The present value is the value today of a sum of money to be received in the future and in general, is less than the future value.
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