FV = PV(1 + i)n

FV = 1,000(1+ 0.1)^(5)
FV = $1,610.51
 FV = PV(1 + i)n
0% interest rate
FV is equals to PV if the interest rate is 0%. Thus, in this problem, FV is the same as PV as

5% interest rate
Year Investment PVF @ 5% PVCI
0 1,000.00 1.00 1,000.00
1 1,000.00 1.05 1,050.00
2 1,000.00 1.10 1,102.50
3 1,000.00 1.16 1,157.63
4 1,000.00 1.22 1,215.51
5 1,000.00 1.28 1,276.28

20% interest rate

Year Investment PVF @ 20% PVCI
0 1,000.00 1.00 1,000.00
1 1,000.00 1.20 1,200.00
2 1,000.00 1.44 1,440.00
3 1,000.00 1.73 1,728.00
4 1,000.00 2.07 2,073.60
5 1,000.00 2.49 2,488.32
ame as PV as 1,000.00 for 0-5 years.
 FV
PV =
(1 + i)n
1,000.00
PV =
(1+(0.1/1))^5
PV = $620.92
 FV = PV(1 + i)n
2,000.00 = 1,000(1 + i)5
2,000/1,000 = (1 + i)5
Interest rate = 14.87%
 FV = PV(1 + i)n
36.5M*2 = 36.5M(1 + .02)n
73M = 36.5M(1 + .02)n
73M/36.5M = (1 + .02)n
2 = 1.02n
Period = 35.00 years
PV of an Ordinary Annuity FV of an Ordinary Annuity
1 - (1 + i)-n
(1 + i)n
PVOA = PYMT FVOA = PYMT
i i
1 - (1 + 0.15)-5 (1 + 0.15)5
PVOA = 1,000.00 FVOA = 1,000
0.15 0.15
PVOA = $3,352.16 FVOA = $6,742.38
 -1
i
-1
0.15
42.38
PV of an Annuity Due FV of an Annuity Due
PVAD = PVOA (1 + i) FVAD = FVOA (1 + i)
PVAD = 3,352.16 x (1 + 0.15) FVAD = 6,742.38 x (1 + 0.15)
PVAD = $3,854.98 FVAD = $7,753.74
 FV FV = PV(1 + i)n
PV =
(1 + i)n FV = 1,000(1 + .075)10
1,000.00 FV = $2,061.03
PV =
(1 + .075)10
PV = $485.19
Annual payments for ordinary annuity Annual payments for annuity due
1 - (1 + i) -n
PYMTAD =
PVOA = PYMT x
i PYMTAD =
1 - (1 + 0.08)-10 PYMTAD =
1,000 = PYMT x
0.08
0.536806511915
1,000 = PYMT x
0.08
1,000 = PYMT x 6.710081398941
PYMT = $149.03
ual payments for annuity due
PYMTOA / (1 + i )
149.03 / (1 + 0.08 )
$137.99
Present Value
End-of-year
Year Payments PVF @ 8% PV @ Year 0
1 100.00 1.08 92.59
2 200.00 1.17 171.47
3 400.00 1.26 317.53
$581.59

Future Value
End-of-year
Year Payments PVF @ 8% FV @ Year 3
1 100.00 1.17 116.64
2 200.00 1.08 216.00
3 400.00 1.00 400.00
$732.64
1. 2.
FV at the end of Year 1 Because all banks have the same risks, si
Bank PV PVF FV deciding factor to identify which bank i
A 5,000.00 1.0600000 5,300.00 higher effectiv
B 5,000.00 1.0609000 5,304.50
C 5,000.00 1.0613636 5,306.82
D 5,000.00 1.0616778 5,308.39 Effective interest rate of Bank A =
E 5,000.00 1.0618313 5,309.16 Period:
Bank B
FV at the end of Year 2 Bank C
Bank PV PVF FV Bank D
A 5,000.00 1.1236000 5,618.00 Bank E
B 5,000.00 1.1255088 5,627.54
C 5,000.00 1.1264926 5,632.46 Nominal rate
D 5,000.00 1.1271598 5,635.80 Bank B
E 5,000.00 1.1274857 5,637.43 Bank C
Bank D
Bank E
 3. Annuity payments
l banks have the same risks, since they are all insured by FDIC, the most PYMT =
factor to identify which bank is better and more reliable is if they have a
higher effective interest rate.
Bank A
PYMT =
nterest rate of Bank A = 6%
PYMT =
semiannual 2
quarterly 4 Bank B
monthly 12
PYMT =
daily 365
PYMT =

5.91% Bank C
5.87%
PYMT =
5.84%
5.83% PYMT =

Bank D
PYMT =
PYMT =

Bank E
PYMT =
PYMT =
nnuity payments 4.
(FVAD)(i)
(1 + i)n -1
/ (1 + i) Investors should consider risks, policies, charges, and oth
banks to consider. Even if they have the same effective an
different to each other in some aspects. Investors should s
and the reliability of the bank.
(5,000)(0.06)
/ (1 + 0.06)
(1 + 0.06)1 -1
$ 4,716.98

(5,000)(0.03)
/ (1 + 0.03)
(1 + 0.03)2 -1
$ 2,391.31

(5,000)(0.015)
/ (1 + 0.015)
(1 + 0.015)4 -1
$ 1,204.16

(5,000)(0.005)
/ (1 + 0.005)
(1 + 0.005)12 -1
$ 403.32

(5,000)(0.06/365)
/ 1 + (0.06/365)
(1 + (0.06/365))365 -1
$ 13.29
ks, policies, charges, and other factors in choosing
y have the same effective annual rate, they can be
me aspects. Investors should study the risk profile
he reliability of the bank.
 Loan Amortization Table

(PV)(i) Year Total Periodic Payment

PYMT =
1 - (1 + i) n
0
(15,000)(0.08) 1 $4,528.81
PYMT =
1 - (1 + 0.08)4 2 $4,528.81
PYMT = $4,528.81 3 $4,528.81
4 $4,528.81
 8%
Interest Payment Principal Payment Loan Balance
$ 15,000.00
1,200.00 $3,328.81 11,671.19
933.70 $3,595.12 8,076.07
646.09 $3,882.73 4,193.34
335.47 $4,193.34 -