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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Practice with Tables

Refer to the appropriate tables on pages 783-786.

Required:

Note: Round answers to two decimal places. Determine the:

a. future value of a single cash flow' of $5,000 that earns 7% interest compounded annually for 10 years.

b. future value of an annual annuity of 10 cash flows of S500 each that earns 7% compounded annually.

c. present value of S5,000 to be received 10 years from now, assuming that the interest (discount) rate is 7% per year.

d. present value of an annuity of $500 per year for 10 years for which the interest (discount) rate is 7% per year and the first cash flow occurs 1 year from now.

To determine

Concept introduction:

Time value of money:

Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.

To calculate:

Future value and present value of the following:

Explanation

After collecting the following data we apply the above mentioned formula of present value and future value to get the answer.

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