For each of the following cases, indicate (a) to what interest rate columns and (b) what number of periods you would refer to in lookingup the future value factor.(1) In Table 1 (future value of 1):Case ACase BCase ACase BCase ACase BCase AAnnual RateCase B5%8%Annual Rate(2) In Table 2 (future value of an annuity of 1):6%(a)4%Number ofYears Invested(a)36%11%Number ofYears Invested7%CompoundedAnnuallySemiannually(b)CompoundedAnnuallySemiannually(b)periodsperiodsperiodsperiods

The time value of money is a key financial concept that indicates that a dollar amount in possession is worth more than one that must be paid later. The time value of money can have an impact on investment decisions. The time value of money can be used by an investor to find possible investment opportunities. Knowing the time value of money and how to calculate it can assist investors in making sound decisions about their spending, saving, and investing strategies.(1) The interest is compounded annually, implying it is paid only once a year. As a result, the annual interest rate will be 5% and the number of periods will be 3. Interest is compounded semi-annually, meaning it is paid twice a year. As a result, interest is divided by two, and the periods are multiplied by two.(2) The interest is compounded annually, implying it is paid only once a year. As a result, the annual interest rate will be 6% and the number of periods will be 11. Interest is compounded semi-annually, meaning it is paid twice a year. As a result, interest is divided by two, and the periods are multiplied by two.Therefore,(1) The Annual rate and number of periods are:(a)(b)Case A5%3 periodsCase B4%12 periods(2) The Annual rate and number of periods are:(a)(b)Case A6%11 periodsCase B2%14 periods

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For each of the following cases, indicate (a) to what interest rate columns and (b) what number of periods you would refer to in looking up the future value factor.

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

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Question

For each of the following cases, indicate (a) to what interest rate columns and (b) what number of periods you would refer to in looking
up the future value factor.
(1) In Table 1 (future value of 1):
Case A
Case B
Case A
Case B
Case A
Case B
Case A
Annual Rate
Case B
5%
8%
Annual Rate
(2) In Table 2 (future value of an annuity of 1):
6%
(a)
4%
Number of
Years Invested
(a)
3
6
%
11
%
Number of
Years Invested
7
%
Compounded
Annually
Semiannually
(b)
Compounded
Annually
Semiannually
(b)
periods
periods
periods
periods

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