ou wish to have an investment that will bring about $50 000 in ten years, and the rate of return is 8% per annum. Required: a. In term of time value of money, what is the amount of $50,000 represent? b. How much do you need to invest now if the rate is compounded annually (to the nearest dollar)? c. If you have $50,000 now and put the sum into a bank account that pays 5% per year. How much will you have in 8 years if the rate is compounded semiannually, quarterly, monthly and daily (to the nearest dollar)?

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.