Round your new table factor to five decimal places and your present value to the nearest cent.
Round your new table factor to five decimal places and your present value to the nearest cent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following investment requires a table factor for a period beyond the table. Calculate the new table factor and the present value (principal). Use Table 11-2. Round your new table factor to five decimal places and your present value to the nearest cent.
| Compound Amount |
Term of Investment (years) |
Nominal Rate (%) |
Interest Compounded |
New Table Factor |
Present Value |
|---|---|---|---|---|---|
| $36,000 | 38 | 7 | annually | $ |
![### Future Value Interest Factor (FVIF) Table
The table presented is a Future Value Interest Factor (FVIF) table, useful for understanding the future value of an investment based on varying interest rates and time periods. This table helps in financial calculations such as investment planning and comparing different financial scenarios.
#### Table Structure
- **Columns**: Each column represents different interest rates ranging from 1% to 18%.
- **Rows**: Each row signifies different periods, numbered from 1 to 24.
#### Key Components
- **Interest Rates**: These are shown at the top of each column. They start at 1% and increase in steps up to 18%.
- **Periods**: Indicated at the beginning and end of each row (on the far left and far right), these range from 1 to 24 periods or years.
#### Table Segmentation
1. **Top Half**: Shows interest rates from 1% to 8%.
2. **Bottom Half**: Shows higher interest rates, from 9% to 18%.
#### Usage
To use this table, locate the desired interest rate column. Then, find the row that corresponds to the number of periods you are considering. The intersection provides the factor used to calculate the future value of an investment.
For example, under a 5% interest rate over 10 periods, the value 1.62889 can be used to determine the future value of an investment by multiplying the initial principal amount by this factor.
#### Example Calculation
If you have a principal of $1,000 and want to calculate its value in 10 years at a 5% interest rate, the formula is:
\[ \text{Future Value} = \text{Principal} \times \text{FVIF} \]
\[ \text{Future Value} = 1000 \times 1.62889 = 1628.89 \]
This indicates that the investment will grow to $1,628.89 after 10 years at a 5% interest rate.
This table is particularly beneficial for comparing outcomes over different time frames or interest rates without needing to calculate each individually.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd201cd7c-f0d9-4cde-8ad3-a66bd40ce2a0%2F6345ced9-beb1-4116-b691-1993d4770d13%2F5ho97h6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Future Value Interest Factor (FVIF) Table
The table presented is a Future Value Interest Factor (FVIF) table, useful for understanding the future value of an investment based on varying interest rates and time periods. This table helps in financial calculations such as investment planning and comparing different financial scenarios.
#### Table Structure
- **Columns**: Each column represents different interest rates ranging from 1% to 18%.
- **Rows**: Each row signifies different periods, numbered from 1 to 24.
#### Key Components
- **Interest Rates**: These are shown at the top of each column. They start at 1% and increase in steps up to 18%.
- **Periods**: Indicated at the beginning and end of each row (on the far left and far right), these range from 1 to 24 periods or years.
#### Table Segmentation
1. **Top Half**: Shows interest rates from 1% to 8%.
2. **Bottom Half**: Shows higher interest rates, from 9% to 18%.
#### Usage
To use this table, locate the desired interest rate column. Then, find the row that corresponds to the number of periods you are considering. The intersection provides the factor used to calculate the future value of an investment.
For example, under a 5% interest rate over 10 periods, the value 1.62889 can be used to determine the future value of an investment by multiplying the initial principal amount by this factor.
#### Example Calculation
If you have a principal of $1,000 and want to calculate its value in 10 years at a 5% interest rate, the formula is:
\[ \text{Future Value} = \text{Principal} \times \text{FVIF} \]
\[ \text{Future Value} = 1000 \times 1.62889 = 1628.89 \]
This indicates that the investment will grow to $1,628.89 after 10 years at a 5% interest rate.
This table is particularly beneficial for comparing outcomes over different time frames or interest rates without needing to calculate each individually.
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