Present Value of Amounts DueAssume that you are going to receive $710,000 in 10 years. The current market rate of interest is 5.5%.a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearestwhole dollar.b. Why is the present value less than the $710,000 to be received in the future?,over the 10 years.The present value is less due to

Time value of money :— According to this concept, value of money in present day is greater than the…

Answered: Present Value of Amounts Due Assume…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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nt Use the compound interest formulas A = P and A = Pert to solve the problem given. Round answers to the nearest cent. Find the accumulated value of an investment of $20,000 for 7 years at an interest rate of 4.5% if the money is a. compounded semiannually; b. compounded quarterly; c. compounded monthly; d. compounded continuously. a. What is the accumulated value if the money is compounded semiannually? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) b.What is the accumulated value if the money is compounded quarterly? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) c. What is the accumulated value if the money is compounded monthly? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.) d. What is the accumulated value if the money is compounded continuously? (Round your answer to the nearest cent. Do not include the $ symbol in your answer.)
Suppose that the interest rate is 5 percent. Instructions: Enter your answers rounded to 2 decimal places. a. What is the future value of $100 six years from now? $ How much of the future value is total interest? $ b. By how much would total interest be greater at an interest rate of 7 percent than at an interest rate of 5 percent?
3. Use the formula for computing future value using compound interest to determine the value of an account at the end of 10 years if a principal amount of $17,000 is deposited in an account at an annual interest rate of 4% and the interest is compounded quarterly. The amount after 10 years will be $_____ (Round to the nearest cent as needed.)
Present Value of Amounts Due Assume that you are going to receive $730,000 in 10 years. The current market rate of interest is 4.5%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $730,000 to be received in the future? The present value is less due to the compounding of interest V over the 10 years.
4. If you receive $116 each month for 28 years and the discount rate is 0.08, what is the present value? (show the process and can use financial calculator)
Present Value of Amounts Due Assume that you are going to receive $210,000 in 10 years. The current market rate of interest is 11%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1 1,378, 329 b. Why is the present value less than the $210,000 to be received in the future? The present value is less due to the compounding of interest over the 10 years.
(Present-value comparison) You are offered $1,300 today, $6,000 in 10 years, or $26.000 in 23 years. Assuming that you can earn 9 percent on your money, which offer should you choose? a. What is the present value of $26,000 in 23 years discounted at 9 percent interest rate? (Round to the nearest cent) b. What is the present value of $6,000 in 10 years discounted at 9 percent interest rate? $(Round to the nearest cent) c. Which offer should you choose? (Select the best choice below) OA. Choose $6,000 in 10 years because its present value is the highest OB. Choose $1,300 today because its present value is the highest OC. Choose $26.000 in 23 years because its present value is the highest Com

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