Please teach me how to do these questions and show wht you did with the calculat
ID: 2713419 • Letter: P
Question
Please teach me how to do these questions and show wht you did with the calculator because I'm not sure if I'm doing it correctly on the calculator.
Show your work for the questions (except IRR & NPV). For example, for question1a, you should show the following as your work/steps: PV=$800, I=6%, N=1, so FV= (your calculation).
1. Find the following values for a lump sum assuming annual compounding:
a. The future value of $800 invested at 6 percent for one year
b. The future value of $800 invested at 6 percent for five years
c. The present value of $800 to be received in one year when the opportunity cost rate is 6 percent
d. The present value of $800 to be received in five years when the opportunity cost rate is 6 percent
1. Find the following values for a lump sum assuming annual compounding:
a. The future value of $800 invested at 6 percent for one year
b. The future value of $800 invested at 6 percent for five years
c. The present value of $800 to be received in one year when the opportunity cost rate is 6 percent
d. The present value of $800 to be received in five years when the opportunity cost rate is 6 percent
Explanation / Answer
Answer (a)
FV =$ 848
Investment PV = $ 800
Period n = 1 year
Rate of interest r = 6% or 6/100 = 0.06
FV = P * (1+r)^n
FV = 800 * (1+0.06)^1 = 800 * 1.06 = $ 848
Answer (b)
FV = $1,070.58
Investment PV = $ 800
Period n = 5 years
Rate of interest r = 6% or 6/100 = 0.06
FV = PV * (1+r)^n
FV = 800 * (1+0.06)^5 = 800 * 1.06^5 = 800 * 1.3382255776
= $ 1070.58046 or $ 1070.58 (rounded off)
Answer (c)
Present Value =$ 754.72
Amount to be received after 1 year FV = $ 800
Period n = 1 year
Discount rate or opportunity cost r = 6% or 0.06
Present Value PV = FV / (1+r)^n = $ 800/(1+0.06)^1 = $ 800 /1.06
= $ 754.7169 or $ 754.72 (rounded off)
Answer (d)
PV = $ 597.81
Amount to be received after 1 year FV = $ 800
Period n = 5 years
Discount rate or opportunity cost r = 6% or 0.06
Present Value PV = FV / (1+r)^n = $ 800/(1+0.06)^5 = $ 800 /1.06^5
= $ 800 /1.3382255776 = $ 597.8065 or $ 597.81 (rounded off)