Present value: Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower. Present value of an amount = Future value ( 1 + interest rate ) number of periods Future Value: The future value is value of present amount compounded at an interest rate until a particular future date. The future value of an amount is calculated by using the following formula: Future value of an amount = Present value × ( 1+ Interest rate ) Number of periods To determine: The single amount that J will invest on December 31, 2018.
Present value: Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower. Present value of an amount = Future value ( 1 + interest rate ) number of periods Future Value: The future value is value of present amount compounded at an interest rate until a particular future date. The future value of an amount is calculated by using the following formula: Future value of an amount = Present value × ( 1+ Interest rate ) Number of periods To determine: The single amount that J will invest on December 31, 2018.
Solution Summary: The author explains that present value refers to the present worth of the money that is received in future in lump sums or as series of cash flows at a specified interest rate.
Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower.
Present value of an amount = Future value(1 + interest rate)numberofperiods
Future Value: The future value is value of present amount compounded at an interest rate until a particular future date. The future value of an amount is calculated by using the following formula:
Future value of an amount = Present value×(1+ Interest rate)Numberofperiods
To determine: The single amount that J will invest on December 31, 2018.
(2)
To determine
The required amount of each deposit when J makes five equal deposits.
(3)
To determine
The required amount when J makes five equal deposits on each December 31, beginning on December 31, 2018.
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