Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter B, Problem 14E
To determine
Present Value:
Present value of money means the present or current value of a future cash flow at a given rate of interest or return.
Future Value:
The future value is the value of present cash flow at specified time period and at specified
We have to determine the rate of interest that must be earned.
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Which of the following investments will have the highest future value atthe end of 10 years? Assume that the effective annual rate for allinvestments is the same.
a. Investment E pays $250 at the end of every year for the next 10
years (a total of 10 payments).
b. Investment B pays $125 at the end of every 6-month period for the
next 10 years (a total of 20 payments).
c. Investment C pays $125 at the beginning of every 6-month period for
the next 10 years (a total of 20 payments).
d. Investment D pays $2,500 at the end of 10 years (a total of one
payment).
e. Investment A pays $250 at the beginning of every year for the next10 years (a total of 10 payments).
Calculate the future value for the following investment’s
Initial investment of $6,000, maturity 5 Years, interest paid annually at 4.5% Show your work
Initial investment of $6,000, maturity 5 years, interest paid semi-annually at 4.5% Show your work
An investment pays $200 at the end of Year I. $250 at the beginning* of Year 2. $387 at the end of Year 4. and $500 at the beginning of Year 6. If other investments of equal Mk earn 7.5% annually. what will be this investments present value and future value?
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