Presented below are a number of values taken from compound i

Presented below are a number of values taken from compound interest tables involving the same number of periods and the same rate of interest. Indicate what each of these four values represents.

(a) 6.71008

(b) 2.15892

(c) .46319

(d) 14.48656

Solution

(a) 6.71008 - this represents the present value of ordinary annuity of $1 at 8% discount rate per 10 years.

(b) 2.15892 - this represents the future value of $1 at 8% compound interest due in 10 years.

(c) 0.46319 - this represents the present value of $1 at 8% discount rate in 10 years.

(d) 14.48656 - this represents the future value of ordinary annuity of $1 at 8% rate per 10 years.