Score: 100/100 Points 100 %

1. Award: 10 out of 10.00 points

For each of the following, compute the future value: (Do not round intermediate calculations and round your answers
to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 2,750 9 12% $7,625.97
9,253 22 10 75,321.96
212,404.61
97,305 16 5
825,733.88
235,382 32 4

References

Worksheet Learning Objective: 04- Section: 4.1 Future Value And Compounding
01 Determine the future
value of an investment
made today.

For each of the following, compute the future value: (Do not round intermediate calculations and round your answers
to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 2,750 9 12% $ 7,625.97 0.1%
9,253 22 10 75,321.96 0.1%
97,305 16 5 212,404.61 0.1%
235,382 32 4 825,733.88 0.1%

Explanation:

To find the FV of a lump sum, we use:

FV = PV(1 + r)t

0 9

$2,750 FV
FV = $2,750(1.12)9 = $7,625.97

0 22

$9,253 FV
FV = $9,253(1.10)22 = $75,321.96

0 16

$97,305 FV
FV = $97,305(1.05)16 = $212,404.61

0 32

$235,382 FV
FV = $235,382(1.04)32 = $825,733.88

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 9 12% $2,750

N I/Y PV PMT FV
Solve for $7,625.97
Enter 22 10% $9,253
N I/Y PV PMT FV
Solve for $75,321.96

Enter 16 5% $97,305
N I/Y PV PMT FV
Solve for $212,404.61

Enter 32 4% $235,382
N I/Y PV PMT FV
Solve for $825,733.88
2. Award: 10 out of 10.00 points

For each of the following, compute the present value: (Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$10,433.99 9 6% $ 17,628
37,336.61 1 12 41,817
128,946.76 13 15 793,382
61,541.90 18 14 650,816

References

Worksheet Learning Objective: 04- Section: 4.2 Present Value And Discounting
02 Determine the present
value of cash to be
received at a future date.

For each of the following, compute the present value: (Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 10,433.99 0.1% 9 6% $ 17,628
37,336.61 0.1% 1 12 41,817
128,946.76 0.1% 13 15 793,382
61,541.90 0.1% 18 14 650,816

Explanation:

To find the PV of a lump sum, we use:

PV = FV / (1 + r)t

0 9

PV $17,628
PV = $17,628 / (1.06)9 = $10,433.99

0 1

PV $41,817
PV = $41,817 / (1.12)1 = $37,336.61

0 13

PV $793,382
PV = $793,382 / (1.15)13 = $128,946.76

0 18

PV $650,816
PV = $650,816 / (1.14)18 = $61,541.90

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 9 6% $17,628
N I/Y PV PMT FV
Solve for $10,433.99

Enter 1 12% $41,817

 N I/Y PV PMT FV
Solve for $37,336.61

Enter 13 15% $793,382

N I/Y PV PMT FV
Solve for $128,946.76

Enter 18 14% $650,816

N I/Y PV PMT FV
Solve for $61,541.90
3. Award: 10 out of 10.00 points

Solve for the unknown interest rate in each of the following: (Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 755 6 11.63 % $ 1,461
945 7 9.62 1,798
19,000 18 11.99 145,832
74,300 21 7.21 320,815

References

Worksheet Learning Objective: 04- Section: 4.1 Future Value And Compounding
03 Calculate the return
on an investment.

Solve for the unknown interest rate in each of the following: (Do not round intermediate calculations and enter your
answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 755 6 11.63 1% % $ 1,461
945 7 9.62 1% 1,798
19,000 18 11.99 1% 145,832
74,300 21 7.21 1% 320,815

Explanation:

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the
inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for r, we get:

r = (FV / PV)1/t 1

0 6

$755 $1,461

FV = $1,461 = $755(1 + r)6

r = ($1,461 / $755)1/6 1
r = .1163, or 11.63%

0 7

$945 $1,798

FV = $1,798 = $945(1 + r)7

r = ($1,798 / $945)1/7 1
r = .0962, or 9.62%

0 18

$19,000 $145,832

FV = $145,832 = $19,000(1 + r)18

r = ($145,832 / $19,000)1/18 1
r = .1199, or 11.99%

0 21
$74,300 $320,815

FV = $320,815 = $74,300(1 + r)21

r = ($320,815 / $74,300)1/21 1
r = .0721, or 7.21%

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 6 $755 $1,461

N I/Y PV PMT FV
Solve for 11.63%

Enter 7 $945 $1,798

N I/Y PV PMT FV
Solve for 9.62%

Enter 18 $19,000 $145,832

N I/Y PV PMT FV
Solve for 11.99%

Enter 21 $74,300 $320,815

N I/Y PV PMT FV
Solve for 7.21%
4. Award: 10 out of 10.00 points

Solve for the unknown number of years in each of the following: (Do not round intermediate calculations and round
your answers to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 300 14.14 10% $ 1,155
1,991 8.23 8 3,750
32,905 20.18 13 387,620
32,600 9.94 20 199,724

References

Worksheet Learning Objective: 04- Section: 4.3 More On Present And Future Values
04 Predict how long it
takes for an investment to
reach a desired value.

Solve for the unknown number of years in each of the following: (Do not round intermediate calculations and round
your answers to 2 decimal places, e.g., 32.16.)

Present Value Years Interest Rate Future Value

$ 300 14.14 1% 10% $ 1,155
1,991 8.23 1% 8 3,750
32,905 20.18 1% 13 387,620
32,600 9.94 1% 20 199,724

Explanation:

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the
inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for t, we get:

t = ln(FV / PV) / ln(1 + r)

0 t

$300 $1,155

FV = $1,155 = $300(1.10)t
t = ln($1,155 / $300) / ln1.10
t = 14.14 years

0 t

$1,991 $3,750

FV = $3,750 = $1,991(1.08)t
t = ln($3,750 / $1,991) / ln1.08
t = 8.23 years

0 t

$32,905 $387,620

FV = $387,620 = $32,905(1.13)t
t = ln($387,620 / $32,905) / ln1.13
t = 20.18 years
 0 t

$32,600 $199,724

FV = $199,724 = $32,600(1.20)t
t = ln($199,724 / $32,600) / ln1.20
t = 9.94 years

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 10% $300 $1,155

N I/Y PV PMT FV
Solve for 14.14

Enter 8% $1,991 $3,750

N I/Y PV PMT FV
Solve for 8.23

Enter 13% $32,905 $387,620

N I/Y PV PMT FV
Solve for 20.18

Enter 20% $32,600 $199,724

N I/Y PV PMT FV
Solve for 9.94
5. Award: 10 out of 10.00 points

Assume the total cost of a college education will be $325,000 when your child enters college in 17 years. You presently
have $51,000 to invest.

What annual rate of interest must you earn on your investment to cover the cost of your childs college education? (Do not
round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Annual rate 11.51 %

References

Worksheet Learning Objective: 04- Section: 4.3 More On Present And Future Values
03 Calculate the return
on an investment.

Assume the total cost of a college education will be $325,000 when your child enters college in 17 years. You presently
have $51,000 to invest.

What annual rate of interest must you earn on your investment to cover the cost of your childs college education? (Do
not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Annual rate 11.51 1% %

Explanation:

The time line is:

0 17

$51,000 $325,000

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the
inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for r, we get:

r = (FV / PV)1/t 1
r = ($325,000 / $51,000)1/17 1
r = .1151, or 11.51%

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 17 $51,000 $325,000

N I/Y PV PMT FV
Solve for 11.51%
6. Award: 10 out of 10.00 points

Youre trying to save to buy a new $230,000 Ferrari. You have $39,000 today that can be invested at your bank. The bank
pays 4.6 percent annual interest on its accounts.

How long will it be before you have enough to buy the car? (Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)

Length of time 39.46 years

References

Worksheet Learning Objective: 04- Section: 4.3 More On Present And Future Values
04 Predict how long it
takes for an investment to
reach a desired value.

Youre trying to save to buy a new $230,000 Ferrari. You have $39,000 today that can be invested at your bank. The
bank pays 4.6 percent annual interest on its accounts.

How long will it be before you have enough to buy the car? (Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)

Length of time 39.46 1% years

Explanation:

The time line is:

0 t

$39,000 $230,000

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the
inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for t, we get:

t = ln(FV / PV) / ln(1 + r)

FV = $230,000 = $39,000(1.046)t
t = ln($230,000 / $39,000) / ln1.046
t = 39.46 years

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 4.6% $39,000 $230,000

N I/Y PV PMT FV
Solve for 39.46
7. Award: 10 out of 10.00 points

Imprudential, Inc., has an unfunded pension liability of $762 million that must be paid in 20 years. To assess the value of
the firms stock, financial analysts want to discount this liability back to the present.

If the relevant discount rate is 10 percent, what is the present value of this liability? (Enter your answer in dollars, not
millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)

Present value $ 113,266,444.60

References

Worksheet Learning Objective: 04- Section: 4.2 Present Value And Discounting
02 Determine the present
value of cash to be
received at a future date.

Imprudential, Inc., has an unfunded pension liability of $762 million that must be paid in 20 years. To assess the value of
the firms stock, financial analysts want to discount this liability back to the present.

If the relevant discount rate is 10 percent, what is the present value of this liability? (Enter your answer in dollars, not
millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)

Present value $ 113,266,444.55 0.01%

Explanation:

The time line is:

0 20

PV $762,000,000

To find the PV of a lump sum, we use:

PV = FV / (1 + r)t
PV = $762,000,000 / (1.10)20
PV = $113,266,444.55

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 20 10% $762,000,000

N I/Y PV PMT FV
Solve for $113,266,444.55
8. Award: 10 out of 10.00 points

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. Assume that in
2015, an auction house sold a statute at auction for a price of $10,668,500. Unfortunately for the previous owner, he had
purchased it in 2008 at a price of $12,700,500.

What was his annual rate of return on this sculpture? (A negative answer should be indicated by a minus sign. Do not
round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Rate of return -2.46 %

References

Worksheet Learning Objective: 04- Section: 4.3 More On Present And Future Values
03 Calculate the return
on an investment.

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. Assume that in
2015, an auction house sold a statute at auction for a price of $10,668,500. Unfortunately for the previous owner, he had
purchased it in 2008 at a price of $12,700,500.

What was his annual rate of return on this sculpture? (A negative answer should be indicated by a minus sign. Do
not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Rate of return -2.46 1% %

Explanation:

The time line is:

0 7

$12,700,500 $10,668,500

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the
inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for r, we get:

r = (FV / PV)1/t 1
r = ($10,668,500 / $12,700,500)1/7 1
r = .0246, or 2.46%

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 7 $12,700,500 $10,668,500

N I/Y PV PMT FV
Solve for 2.46%
9. Award: 10 out of 10.00 points

You have just made your first $4,000 contribution to your individual retirement account. Assume you earn an annual return
11.05 percent and make no additional contributions.

What will your account be worth when you retire in 44 years? (Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)

Account value $ 402,602.77

What if you wait 10 years before contributing? (Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)

Account value $ 141,153.33

References

Worksheet Learning Objective: 04- Section: 4.3 More On Present And Future Values
01 Determine the future
value of an investment
made today.

You have just made your first $4,000 contribution to your individual retirement account. Assume you earn an annual
return 11.05 percent and make no additional contributions.

What will your account be worth when you retire in 44 years? (Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)

Account value $ 402,602.77 .1%

What if you wait 10 years before contributing? (Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.)

Account value $ 141,153.33 .1%

Explanation:

To find the FV of a lump sum, we use:

FV = PV(1 + r)t

0 44

$4,000 FV

FV = $4,000(1.1105)44
FV = $402,602.77

If you wait 10 years, the value of your deposit at your retirement will be:

0 34

$4,000 FV

FV = $4,000(1.1105)34
FV = $141,153.33

Better start early!

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 44 11.05% $4,000

 N I/Y PV PMT FV
Solve for $402,602.77

Enter 34 11.05% $4,000

N I/Y PV PMT FV
Solve for $141,153.33

10. Award: 10 out of 10.00 points

You need $84,000 in 8 years.

If you can earn .51 percent per month, how much will you have to deposit today? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)

Deposit today $ 51,545.30

References

Worksheet Learning Objective: 04- Section: 4.2 Present Value And Discounting
02 Determine the present
value of cash to be
received at a future date.

You need $84,000 in 8 years.

If you can earn .51 percent per month, how much will you have to deposit today? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)

Deposit today $ 51,545.30 0.1%

Explanation:

The time line is:

0 96

PV $84,000

To find the PV of a lump sum, we use:

PV = FV / (1 + r)t
PV = $84,000 / (1.0051)96
PV = $51,545.30

Calculator Solution:
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the
calculation.

Enter 96 .51% $84,000

N I/Y PV PMT FV
Solve for $51,545.30