**FIN 370 Cash Flow Problem Sets Week 2 Questions 5-1**

5-1

FutureValue

Compute the future value in year 9 of a $2,000 deposit in year 1 and another

$1,500 deposit at the end of year 3 using a 10 percent interest rate

5-1

FutureValue

Compute the future value in year 9 of a $2,000 deposit in year 1 and another

$1,500 deposit at the end of year 3 using a 10 percent interest rate.

FV =

$

2,000

x

(

1

+

0.10

)

7

+

$

1,500

x

(

1

+

0.10

)

5

= $3,897.42 + $2,415.77 = $6,313.19

5-3 Future Value of an Annuity What is the future value of a $900 annuity payment over five

years if interest rates are 8 percent?

5-5 Present Value Compute the present value of a $2,000 deposit in year 1 and another $1,500

deposit at the end of year 3 if interest rates are 10 percent.

Present value = 2000/(1+10%)^1 + 1500/(1+10%)^3 = $2,945.15

5-7 Present Value of an Annuity What’s the present value of a $900 annuity payment over five

years if interest rates are 8 percent?

PV of annuity = PMT*PVIFA(i,n) = 900*PVIFA(8%,5) = 900*

3.9927 = $3,593.43

5-12

Present Value of an Annuity Due

If the present value of an ordinary, 6-year annuity is $8,500 and

interest rates are 9.5 percent, what’s the present value of the same annuity due

**Category:**Business, General Business

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