Concept explainers
Future Value of Money Suppose that you make deposits of$
Verify that the value of the account at the beginning of the third year is
The account value at the beginning of the fourth year is
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Precalculus (10th Edition)
- Depreciation Once a new car is driven away from the dealer, it begins to lose value. Each year, a car loses 10% of its value. This means that each year the value of a car is 90% of the previous year’s value. If a new car was purchased for $20,000, the value at the end of the first year would be $20000(0.90) and the value of the car after the end of the second year would be $20000(0.90)2. Complete the table shown below. What will be the value of the car at the end of the eighth year? Simplify the expression, to show the value in dollars.arrow_forwardFuture Value In certain savings scenarios, the value F of an investment after t years, the future value, is given by F=P1+rt. Here r is the yearly interest rate as a decimal, P is the amount of the original investment and t is the term of the investment. If we invest 1000 at an interest rate of 0.06 per year as a decimal, and if the term of the investment is 5 years, what is the future value?continuedarrow_forwardFuture Value Business and finance texts refer to the value of an investment at a future time as its future value. If an investment of P dollars is compounded yearly at an interest rate of r as a decimal, then the value of the investment after t years is given by FutureValue=P1+rt. In this formula, 1+rt is known as the future value interest factor, so the formula above can be written as FutureValue=PFuturevalueinterestfactor Financial officers normally calculate this or look it up in a table a. What future value interest factor will make an investment double? b. Say you have an investment that is compounded yearly at a rate of 9%. Find the future value interest factor for a 7-year investment. c. Use the results from part b to calculate the 7-year future value if your initial investment is 5000.arrow_forward
- Your Childs Education You want to begin making regular deposits to finance your childs college education 18 years 216 months in the future. You are able to invest 200 at the end of each month, and you judge that 100, 000 will be needed. That is, you want the future value F of the investment to be 100, 000. Whether you can attain that goal depends on interest rates. If the monthaly interest rate is r as a decimal, then the future value of the investment is given by F=200r1+r216-1 dollars. a. Plot the graph of F along with the target value of 100, 000. Use a horizontal span of 0 to 0.01. b. Fina the monthly rate r that will yield the dsired future value of 100, 000. Round your answer as a percentage to one decimal place. c. What is your total investment in your childs education?arrow_forwardStock Turnover at Retail In retail sales, an important marker of retail activity is the stock turnover at retail. This figure is calculated for a specific period of time as the total net sales divided by the retail value of the average stock during that time, where both are measured in dollars. As a formula, this is written Stockturnover=NetsalesAveragestockatretail. This formula expresses stock turnover as a function of net sales and average stock at retail. a. Suppose that your store had net sales of 682, 000 in mens shoes over the past six months and that the retail value of the average stock of mens shoes was 163, 000. What was the stock turnover at retail for that time period? b. Suppose that in a certain month, your stores net sales of womens dresses were 83, 000 and that the usual stock turnover at retail is 0.8 per month. What do you estimate to be your stores average stock at retail? c. Solve the equation for average stock at retail- that is, write a formula giving average stock at retail as a function of stock turnover and net sales. d. Suppose that in a certain time period, your store had an average stock of socks with a retail value of 45, 000 and a stock turnover at retail of 1.6. What were the stores net sales of socks during that time period? e. Solve the equation for net sales- that is, write a formula giving net sales as a function of stock turnover and average stock at retail.arrow_forwardEquity: When you use a mortgage to purchase a home, the leading institution effectively owns the home. You buy back part ownership in the home with each monthly payment. The part you have bought back is your equity in the home. If the mortgage amount is P dollars, the monthly interest rate is r as a decimal, and the term of the mortgage is t months, then your equity after k payments is E(k)=P((1+r)k1)(1+r)t1dollars In this exercise, assume that the mortgage amount is 200,000, the APR is 6so r=0.06/12, and the term of the loan is 30 years 360 months. a. Find a formula for the equity. b. Make a graph of the equity over 360 months, the term of the loan. c. Does the graph show that you have half-ownership in the home halfway through the term of the mortgage?arrow_forward
- An Uncertain Investment Suppose you invested 1300 in the stock market two years ago. During the first year the value of the stock increased by 12%. During the second year, the value of the stock decreased by 12%. How much money is your investment worth at the end of the two-year period? Did you earn money or lose money? Note: The answer to the first question is not 1300arrow_forwardDepreciation A tool and die company buys a machine for $175,000 and it depreciates at a rate of 30 per year. (In other words, at the end of each year the depreciated value is 70 of what it was at the beginning of the year.) Find the depreciated value of the machine after 5 full years.arrow_forwardPresent Value If you invest P dollars the present value of your investment in a fund that pays an interest rate of r, as a decimal, compounded yearly, then after t years, your investment will have a value of F dollars, which is known as the future value. The discount rare D for such an investment is given by D=1(1+r)t where t is the life, in years, of the investment. The present value of an investment is the product of the future value and the discount rate. Find a formula that gives the present value in terms of the future value, the interest rate, and the life of the investment.arrow_forward
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