CENGAGE MINDTAP

Ch 05-End-of-Chapter Problems - Time Value of Money

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Find the following values. Compounding/discounting occurs annually. Do not round intermediate calculations. Round your answers to the nearest cent.

a. An initial $400 compounded for 10 years at 6%.

$

b. An initial $400 compounded for 10 years at 12%.

$

c. The present value of $400 due in 10 years at 6%.

$

d. The present value of $2,395 due in 10 years at 12% and 6%.

Present value at 12%: $

Present value at 6%: $

e. Define present value.

I. The present value is the value today of a sum of money to be received in the future and in general is less than the future value.

II. The present value is the value today of a sum of money to be received in the future and in general is greater than the future value.

III. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value.

IV. The present value is the value in the future of a sum of money to be received today and in general is less than the future value.

V. The present value is the value in the future of a sum of money to be received today and in general is greater than the future value.

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How are present values affected by interest rates?

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