Chapter B, Problem 1QS

To determine

Concept Introduction:

Future value:

Future value refers to the amount to be received in future time. In other words we can say that money that will be received after some time which is calculated with the help of interest rate and number of period interest compunded is known as future value.

Requirement 1:

Interest rate column and number-of-periods row when 12% annual rate, compounded annually.

Answer to Problem 1QS

Interest rate column = 12^th column (Which is given under 12% interest rate).

Number-of-periods row = 3^rd row (Which is given in front of 2 number period).

Explanation of Solution

Future value is calculated with the help of following formula;

  $\text{Future value = Present value x (1 + r)^n}$

Interest rate is given = 12%

Number of periods are given = 2

As per Table B.2, we will use column and row as follow;

Thus,

Interest rate column = 12^th column (Which is given under 12% interest rate).

Number-of-periods row = 3^rd row (Which is given infront of 2 number period).

To determine

Concept Introduction:

Future value:

Future value refers to the amount to be received in future time. In other words we can say that money that will be received after some time which is calculated with the help of interest rate and number of period interest compunded is known as future value.

Requirement 2:

Interest rate column and number-of-periods row when 6% annual rate, compounded semiannually.

Answer to Problem 1QS

Interest rate column = 3^rdcolumn (Which is given under 3% interest rate).

Number-of-periods row = 5^th row (Which is given infront of 4 number period).

Explanation of Solution

Future value is calculated with the help of following formula;

  $\text{Future value = Present value x (1 + r)^n}$

Interest rate (6% / 2) = 3%

Number of periods (2 x 2) = 4

As per Table B.2, we will use column and row as follow;

Thus,

Interest rate column = 3^rd column (Which is given under 3% interest rate).

Number-of-periods row = 5^th row (Which is given infront of 4 number period).

To determine

Concept Introduction:

Future value:

Future value refers to the amount to be received in future time. In other words we can say that money that will be received after some time which is calculated with the help of interest rate and number of period interest compunded is known as future value.

Requirement 3:

Interest rate column and number-of-periods row when 8% annual rate, compounded quarterly.

Answer to Problem 1QS

Interest rate column = 2^nd column (Which is given under 2% interest rate).

Number-of-periods row = 9^th row (Which is given infront of 8 number period).

Explanation of Solution

Future value is calculated with the help of following formula;

  $\text{Future value = Present value x (1 + r)^n}$

Interest rate per period (8% / 4) = 2%

Number of periods (2 x 4) = 8

As per Table B.2, we will use column and row as follow;

Thus,

Interest rate column = 2^nd column (Which is given under 2% interest rate).

Number-of-periods row = 9^th row (Which is given infront of 8 number period).

To determine

Concept Introduction:

Future value:

Future value refers to the amount to be received in future time. In other words we can say that money that will be received after some time which is calculated with the help of interest rate and number of period interest compunded is known as future value.

Requirement 4:

Interest rate column and number-of-periods row when 12% annual rate, compounded monthly.

Answer to Problem 1QS

Interest rate column = 1^stcolumn (Which is given under 1% interest rate).

Number-of-periods row = Not given in the table (n = 24).

Explanation of Solution

Future value is calculated with the help of following formula;

  $\text{Future value = Present value x (1 + r)^n}$

Interest rate per period (12% / 12) = 1%

Number of periods (2 x 12) = 24

As per Table B.2, we will use column and row as follow;

Thus,

Interest rate column = 1^st column (Which is given under 1% interest rate).

Number-of-periods row = Not given in the table (n = 24)