a.
Calculate the amount that is to be deposited today to receive $60,000 in four years.
a.

Explanation of Solution
Present Value:
Present value refers to the current value of future sum of money in lump sum or in instalments with a stated rate of interest.
Therefore, the present value of the amount that is to be deposited today to receive $60,000 in four years is $42,504.
b.
Calculate the amount that is to be deposited today to receive $15,000 while graduating.
b.

Explanation of Solution
Present Value:
Present value refers to the current value of future sum of money in lump sum or in instalments with a stated rate of interest.
Therefore, the present value of the amount that is to be deposited today to receive $15,000 while graduating is $12,859.60.
c.
Identify whether $463 currently or $1,000 will be received after 10 years from now.
c.

Explanation of Solution
Future value:
The future value is value of present amount compounded at an interest rate until a particular future date.
Present Value:
Present value refers to the current value of future sum of money in lump sum or in instalments with a stated rate of interest.
Calculate the future value of $463 at 9% for 10 years:
Therefore, the future value of $463 is $1,096.12.
Calculate the present value of $1,000 will be received after 10 years from now:
Therefore, the present value of $1,000 will be received after 10 years from now is $422.40
d.
Calculate the cost of college parking sticker in eight years.
d.

Explanation of Solution
Future value:
The future value is value of present amount compounded at an interest rate until a particular future date.
Calculate the cost of college parking sticker in eight years:
Therefore, the cost of college parking sticker in eight years is $132.98.
e.
Calculate the cost of new home in eight years.
e.

Explanation of Solution
Future value:
The future value is value of present amount compounded at an interest rate until a particular future date.
Calculate the cost of new home in eight years.
Therefore, the cost of new home in eight years is $339,764.20.
f.
Calculate the amount that will be paid today for given type of investment in this situation.
f.

Explanation of Solution
Present Value:
Present value refers to the current value of future sum of money in lump sum or in instalments with a stated rate of interest.
Annuity:
An annuity is referred as a sequence of payment of fixed amount of
Calculate the amount that will be paid today for given type of investment in this situation by using a present value of a lump sum part:
Calculate the amount that will be paid today for given type of investment in this situation by using a present value of an annuity part:
Therefore, the amount that will be paid today for given type of investment in this situation is
g.
Calculate the present value for the given transaction.
g.

Explanation of Solution
Present Value:
Present value refers to the current value of future sum of money in lump sum or in instalments with a stated rate of interest.
Annuity:
An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.
Calculate the present value:
Therefore, the present value is $5,734,950.
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Chapter B Solutions
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