CHAPTER 9

Answer 1:

FV= PV x FVIF
FVIF : (1+i)n
PV: $2500
a) Value of investment: $2500 x 1.08
: $2700
b) Value of investment: $2700 x 1.08
: $2916
c) Value of investment: $2916 x 1.08
: $3149.28
d) PV: $2500
i=8%
n=3
FVIF = (1 + 0.08)3
= 1.26
FV= PV x FVIF
: $2500 X 1.26
: $ 3150

Answer 2:

PV = FV x PVIF
PVIF =
1
(1+i)n
a)
FV: $8,000
n: 10 years
i: 6%
PVIF =

1
(1+0.06)10

PV: $8,000 x 0.556

: $4,448
b)
FV: $16,000

= 0.556

n: 5 years
i: 12%
PVIF =

1
(1+0.12)5

= 0.568

PV: $16,000 x 0.568

: $9088

c)
FV: $25,000
n: 15 years
i: 8%
PVIF =

1
(1+0.08)8

= 0.540

PV: $25,000 x 0.550

: $13,500

Answer 3:

PV = FV x PVIF
PVIF =
1
(1+i)n
a)
FV: $100,000
n: 40 years
i: 18%
PVIF =

1
(1+0.18)40

= 0.0013

PV: $100,000 x 0.0013

: $130

b) No the value will not be enough to buy the concert ticket.