Concept explainers
Present Value Present value is the amount of money that must be invested now at a given rate of interest to produce a given future value. For a one-year investment, the present value can be determined using
Where
Want to see the full answer?
Check out a sample textbook solutionChapter P Solutions
Functions and Change: A Modeling Approach to College Algebra (MindTap Course List)
- Future Value Business and finance texts refer to the value of an investment at a future time as its future value. If an investment of P dollars is compounded yearly at an interest rate of r as a decimal, then the value of the investment after t years is given by FutureValue=P1+rt. In this formula, 1+rt is known as the future value interest factor, so the formula above can be written as FutureValue=PFuturevalueinterestfactor Financial officers normally calculate this or look it up in a table a. What future value interest factor will make an investment double? b. Say you have an investment that is compounded yearly at a rate of 9%. Find the future value interest factor for a 7-year investment. c. Use the results from part b to calculate the 7-year future value if your initial investment is 5000.arrow_forwardFuture Value In certain savings scenarios, the value F of an investment after t years, the future value, is given by F=P1+rt. Here r is the yearly interest rate as a decimal, P is the amount of the original investment and t is the term of the investment. If we invest 1000 at an interest rate of 0.06 per year as a decimal, and if the term of the investment is 5 years, what is the future value?continuedarrow_forwardYour Childs Education You want to begin making regular deposits to finance your childs college education 18 years 216 months in the future. You are able to invest 200 at the end of each month, and you judge that 100, 000 will be needed. That is, you want the future value F of the investment to be 100, 000. Whether you can attain that goal depends on interest rates. If the monthaly interest rate is r as a decimal, then the future value of the investment is given by F=200r1+r216-1 dollars. a. Plot the graph of F along with the target value of 100, 000. Use a horizontal span of 0 to 0.01. b. Fina the monthly rate r that will yield the dsired future value of 100, 000. Round your answer as a percentage to one decimal place. c. What is your total investment in your childs education?arrow_forward
- Functions and Change: A Modeling Approach to Coll...AlgebraISBN:9781337111348Author:Bruce Crauder, Benny Evans, Alan NoellPublisher:Cengage LearningAlgebra & Trigonometry with Analytic GeometryAlgebraISBN:9781133382119Author:SwokowskiPublisher:Cengage