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Compound Interest, Future Value, and Present Value, 10 Percent Interest Rate (1) (2) Computation (3) Total Interest (4) Beginning Period Value End Period Value $1,000 (Year 1) $1,000 x 1.10 = $1,100 $100 $1,100 (= $1,000 + $100) $1,100 (Year 2) $1,100 x 1.10 = $1,210 $210 (= $100 + $110) $1,210 (= $1,000 + $210) $1,210 (Year 3) $1,210 x 1.10 = $1,331 $331 (= $100 + $110 + $121) $1,331 (= $1,000 + $331)

Compound Interest, Future Value, and Present Value, 10 Percent Interest Rate (1) (2) Computation (3) Total Interest (4) Beginning Period Value End Period Value $1,000 (Year 1) $1,000 x 1.10 = $1,100 $100 $1,100 (= $1,000 + $100) $1,100 (Year 2) $1,100 x 1.10 = $1,210 $210 (= $100 + $110) $1,210 (= $1,000 + $210) $1,210 (Year 3) $1,210 x 1.10 = $1,331 $331 (= $100 + $110 + $121) $1,331 (= $1,000 + $331)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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As shown in Table, $1,000 invested at 10 percent compound interest will grow into $1,331 after three years. What is the present value of $2,662 in three years if it is discounted back to the present at a 10 percent compound interest rate? (Hint: $2,662 is twice as much as $1,331.)

Compound Interest, Future Value, and Present Value, 10 Percent Interest Rate (1) (2) Computation (3) Total Interest (4) Beginning Period Value End Period Value $1,000 (Year 1) $1,000 x 1.10 = $1,100 $100 $1,100 (= $1,000 + $100) $1,100 (Year 2) $1,100 x 1.10 = $1,210 $210 (= $100 + $110) $1,210 (= $1,000 + $210) $1,210 (Year 3) $1,210 x 1.10 = $1,331 $331 (= $100 + $110 + $121) $1,331 (= $1,000 + $331)
Transcribed Image Text:Compound Interest, Future Value, and Present Value, 10 Percent Interest Rate (1) (2) Computation (3) Total Interest (4) Beginning Period Value End Period Value $1,000 (Year 1) $1,000 x 1.10 = $1,100 $100 $1,100 (= $1,000 + $100) $1,100 (Year 2) $1,100 x 1.10 = $1,210 $210 (= $100 + $110) $1,210 (= $1,000 + $210) $1,210 (Year 3) $1,210 x 1.10 = $1,331 $331 (= $100 + $110 + $121) $1,331 (= $1,000 + $331)
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