Present and Future Value

Topics: Time, Future, Present Pages: 1 (289 words) Published: August 9, 2011
‬Present and Future Value

HCA 270

 
Calculate the future value of the following:
 
* $5,000 compounded annually at 6% for 5 years‬ $6,691.13‬ * $5,000 compounded semiannually at 6% for 5 years‬ $6719.58‬ * $5,000 compounded quarterly at 6% for 5 years $6734.28‬‬ * $5,000 compounded annually at 6% for 6 years‬ $7092.60‬  

Answer the following: The conclusion that can be drawn about the frequency of compounding interest is that the more frequency the better. The conclusion that can be drawn about the length of time an amount is compounding is the same the more or longer the better. It just keeps adding up.  

Calculate the present value of the following:
 
* $7,000 in 5 years at an annual discount rate of 6%‬‬ $5230.81
* $7,000 in 5 years at a semiannual discount rate of 6%‬‬ $5208.66
* $7,000 in 5 years at a quarterly discount rate of 6%‬‬ $5197.30
* $7,000 in 6 years at an annual discount rate of 6%‬‬ $4934.73
 
Answer the following: The conclusion that can be drawn about the frequency of the discounting interval is that the more frequent discounting interval more money that is lost. The conclusion that can be drawn about the length of time until the receipt of that value is the same a loss.

Answer the following: I would chose contract A because they are both paying the same amount for the same amount of time and have the same discount rate. If the money is left in a little longer it might build up more. So I would wait another year to receive the money and let it build. Assume you have a choice between two annuity contracts.
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