a How much would you have to deposit today if you wanted to

a. How much would you have to deposit today if you wanted to have $63,000 in five years? Annual interest rate is 8%. (PV0fSLEV of $1. PVA of S1 and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.) Present value b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 7% on your investments. how much would you have to deposit today to have $17,500 when you graduate? (Round your answer to 2 decimal places.) Present value c-1. Calculate the future value of an investment of $751 for eleven years earning an interest of 9%. (Round your answer to 2 decimal places.) Future value c-2. Would you rather have $751 now or $1,800 eleven years from now? Eleven years from now Now

Solution

Answer a.

Future Value = $63,000
Period = 5 years
Interest Rate = 8%

Present Value = $63,000 * PV of $1 (8%, 5)
Present Value = $63,000 * 0.6806
Present Value = $42,878

Answer b.

Future Value = $17,500
Period = 2 years
Interest Rate = 7%

Present Value = $17,500 * PV of $1 (7%, 2)
Present Value = $17,500 * 0.8734
Present Value = $15,285

Answer c-1.

Present Value = $751
Period = 11 years
Interest Rate = 9%

Future Value = $751 * FV of $1 (9%, 11)
Future Value = $751 * 2.5804
Future Value = $1,938

Answer c.

I would have $751 now rather than $1,800 eleven years from now.