Future Value

Present Value
Annual Interest Rate
Number of compounding
periods per year
Years
Period Rate
Total Number of Periods
FV = PV*(1+i/n)^((x*n)
FV(rate,nper,pmt,[pv],[type])

Variables
Mgirvin uses
FV
PV
i
n
x
i/n
x*n

Variables
Excel uses
FV
PV

Numbers and
Formulas
?
10000
0.06
12
10

rate
nper or npery

Total Interest

Variables
textbook uses
FV or C
PV or C

r
t

Future Value
Present Value
Annual Interest Rate
Number of compounding
periods per year
Years
Period Rate
Total Number of Periods
FV = PV*(1+i/n)^((x*n)
FV(rate,nper,pmt,[pv],[type])

Variables
Mgirvin uses
FV
PV
i
n
x
i/n
x*n

Variables Excel Numbers and

uses
Formulas
FV
?
PV
10000
0.06

rate
nper or npery

12
10
0.005
120
$18,193.97
$18,193.97

Total Interest

$8,193.97

Variables
textbook uses
FV or C
PV or C

r
t

PV = Investment =
i = Annual Interest Rate =
n = Compounding Periods per Year =
x = years =
Simple Interest =
Year
Year
Year
Year
Year
Year

$100.00
0.1
1
4

Interest Earned
0
1
2
3
4

FV = Future Value of Investment @ Simple Interest =

Amount in Bank

PV = Investment =
i = Annual Interest Rate =
n = Compounding Periods per Year =
x = years =
Simple Interest =
Year
Year
Year
Year
Year
Year

$100.00
0.1
1
4
$10.00
Interest Earned

0
1
2
3
4

FV = Future Value of Investment @ Simple Interest =

$10.00
$10.00
$10.00
$10.00
$140.00

Amount in Bank
$100.00
$110.00
$120.00
$130.00
$140.00

PV = Investment =
i = Annual Interest Rate =
n = Compounding Periods per Year =
x = years =
Year
Year
Year
Year
Year
Year

$100.00
0.1
1
4
Interest Earned

0
1
2
3
4

FV = Future Value of Investment @ Compound Interest =

FV = Future Value of Investment @ Compound Interest =
FV = Future Value of Investment @ Simple Interest =
FV = Future Value of Investment @ Compound Interest =
Interest on Interest =

Amount in Bank

PV = Investment =
i = Annual Interest Rate =
n = Compounding Periods per Year =
x = years =
Year
Year
Year
Year
Year
Year

$100.00
0.1
1
4
Interest Earned

0
1
2
3
4

$10.00
$11.00
$12.10
$13.31

FV = Future Value of Investment @ Compound Interest =

$146.41

FV = Future Value of Investment @ Compound Interest =

$146.41

FV = Future Value of Investment @ Simple Interest =

FV = Future Value of Investment @ Compound Interest =
Interest on Interest =

$140.00
$146.41
$6.41

Amount in Bank
$100.00
$110.00
$121.00
$133.10
$146.41

PV = Investment =
i = Annual Interest Rate =
n = Compounding Periods per Year =
x = years =

Time
0
1
2
3
4
5
6
7
8
9
10

$100.00
0.1
1
4

Amount in Bank each Year with Simple

Amount in Bank each Year
Interest
with Compound Interest
$100.00
$100.00
$110.00
$110.00
$120.00
$121.00
$130.00
$133.10
$140.00
$146.41
$150.00
$161.05
$160.00
$177.16
$170.00
$194.87
$180.00
$214.36
$190.00
$235.79
$200.00
$259.37

$300.00
Amount in Bank each Year with Compound
Interest
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
Fu tu re Va lu e

Difference
$0.00
$0.00
$1.00
$3.10
$6.41
$11.05
$17.16
$24.87
$34.36
$45.79
$59.37

0 1 2 3 4 5 6 7 8 9 10

70000.00% Annual Rate

0.00% Annual
Rate

60000.00% Annual Rate

2.50% Annual
Rate

50000.00% Annual Rate

40000.00% Annual Rate

5.00% Annual
Rate

30000.00% Annual Rate

20000.00% Annual Rate

7.50% Annual
Rate

10000.00% Annual Rate

10.00% Annual
Rate

0.00% Annual Rate

3 4
Time

10

12.50% Annual
Rate

0.00% Annual
Rate
2.50% Annual
Rate
5.00% Annual
Rate
7.50% Annual
Rate
10.00% Annual
Rate

10

12.50% Annual
Rate

If we invest $100,000.00 with an annual rate of 7.00% compounded 12 times a

year for 10 years, what is the future value of the investment?
Present Value = PV
$
100,000.00
Annual Interest Rate = i
7.00%
Number of Compoundin Periods per Year = n
12
Years = x
10
Future Value = FV
Period Rate = i/n
Total Periods = n*x
(1 + i/n)^(n*x)
Future Value = FV
Future Value = FV
Future Value = FV
Total Interest earned = cash put in - cash taken out
Write it in words:

If we invest $100,000.00 with an annual rate of 7.00% compounded 12 times a

year for 10 years, what is the future value of the investment?
Present Value = PV
$
100,000.00
Annual Interest Rate = i
7.00%
Number of Compoundin Periods per Year = n
12
Years = x
10
Future Value = FV
Period Rate = i/n
0.0058333333
Total Periods = n*x
120
(1 + i/n)^(n*x)
2.0096613766956
Future Value = FV
$
200,966.14
Future Value = FV
$
200,966.14
Future Value = FV
$200,966.14
Total Interest earned = cash put in - cash taken out
$100,966.14

Write it in words:

If we invest $100,000.00 with an annu

times a year for 10 years, our future
$200,966.14. Of that amount, $100,96
investme

$100,000.00 with an annual rate of 7.00% compounded 12

ear for 10 years, our future value of the investment will be
4. Of that amount, $100,966.14 is the interest earned on the
investment.

If we invest $15,000.00 with an annual rate of 5.50% compounded 365 times a

year for 10 years, what is the future value of the investment?
Present Value = PV
$
15,000.00
Annual Interest Rate = i
5.50%
Number of Compoundin Periods per Year = n
365
Years = x
10
Future Value = FV
Period Rate = i/n
Total Periods = n*x
Future Value = FV
Future Value = FV
Total Interest earned = cash put in - cash taken out
Write it in words:

If we invest $15,000.00 with an annual rate of 5.50% compounded 365 times a

year for 10 years, what is the future value of the investment?
Present Value = PV
$
15,000.00
Annual Interest Rate = i
5.50%
Number of Compoundin Periods per Year = n
365
Years = x
10
Future Value = FV
Period Rate = i/n
0.0001506849
Total Periods = n*x
3650
Future Value = FV
$
25,997.72
Future Value = FV
$25,997.72
Total Interest earned = cash put in - cash taken out
$10,997.72

Write it in words:

If we invest $15,000.00 with an annual

times a year for 10 years, our future
$25,997.72. Of that amount, $10,997.
investme

t $15,000.00 with an annual rate of 5.50% compounded 365

ear for 10 years, our future value of the investment will be
2. Of that amount, $10,997.72 is the interest earned on the
investment.

How much would we have to invest today, if we want to have $1,000,000.00 in 40

years and we could earn an annual interest rate (discount rate) of 10.00% compounded
12 times a year?
Present Value = PV
"Annual Interest Rate" = Discount Rate (term used when
doing PV calculations) = i
10.00%
Number of Compoundin Periods per Year = n
12
Years = x
40
Future Value = FV
$
1,000,000.00
Period Payment = PMT
Period Rate = i/n
Total Periods = n*x
(1 + i/n)^(n*x)
Present Value = PV
Present Value = PV
Present Value = PV
Total Interest earned = cash put in - cash taken out
Write it in words:

How much would we have to invest today, if we want to have $1,000,000.00 in 40

years and we could earn an annual interest rate (discount rate) of 10.00% compounded
12 times a year?
Present Value = PV
"Annual Interest Rate" = Discount Rate (term used when
doing PV calculations) = i
10.00%
Number of Compoundin Periods per Year = n
12
Years = x
40
Future Value = FV
$
1,000,000.00
Period Payment = PMT
Period Rate = i/n
0.0083333333
Total Periods = n*x
480
(1 + i/n)^(n*x)
53.7006631743291
Present Value = PV
$
18,621.74
Present Value = PV
$
18,621.74
Present Value = PV
-$18,621.74
Total Interest earned = cash put in - cash taken out
$
981,378.26

Write it in words:

We would have to invest $18,62

$1,000,000.00 in 40 years and we
(discount rate) of 10.00% com

FV=PV(1+i/n)^(xn)
FV/((1+i/n)^(xn))=(PV(1+i/n)^(xn))/((1+i/n)^(xn))
FV/((1+i/n)^(xn))=(PV(1+i/n)^(xn))/((1+i/n)^(xn))
FV/((1+i/n)^(xn))=PV

d have to invest $18,621.74 today, if we want to have

00 in 40 years and we could earn an annual interest rate
unt rate) of 10.00% compounded 12 times a year.

How much would we have to invest today, if we want to have $150,000.00 (for our
daughter's college tuition) in 18 years and we could earn an annual interest rate (discount
rate) of 6.95% compounded 365 times a year?
Present Value = PV
"Annual Interest Rate" = Discount Rate (term used when doing PV
calculations) = i
6.95%
Number of Compoundin Periods per Year = n
365
Years = x
18
Future Value = FV
$
150,000.00
Period Payment = PMT
Period Rate = i/n
Total Periods = n*x
(1 + i/n)^(n*x)
Present Value = PV
Present Value = PV
Present Value = PV
Total Interest earned = cash put in - cash taken out
Write it in words:

How much would we have to invest today, if we want to have $150,000.00 (for our
daughter's college tuition) in 18 years and we could earn an annual interest rate (discount
rate) of 4.00% compounded 365 times a year?
Present Value = PV
"Annual Interest Rate" = Discount Rate (term used when doing PV
calculations) = i
Number of Compoundin Periods per Year = n
Years = x
Future Value = FV
Period Payment = PMT
Period Rate = i/n
Total Periods = n*x
(1 + i/n)^(n*x)
Present Value = PV
Present Value = PV
Present Value = PV
Total Interest earned = cash put in - cash taken out

Write it in words:

nt to have $150,000.00 (for our

n an annual interest rate (discount
imes a year?

4.00%
365
18
150,000.00

0.000109589041095890
6570
2.0543521665509
$
73,015.72
$
73,015.72
($73,015.72)
$
76,984.28
We would have to invest $73,015.72 today, if we want to have $150,000.00
(for our daughter's college tuition) in 18 years and we could earn an annual
interest rate (discount rate) of 4.00% compounded 365 times a year?

If you want to buy a $350,000.00 C & C Router Machine to improve manufacturing efficiency and you
$200,000.00 today that you can invest at an annual rate of 8.50% compounded 12 times a year, how
do you have to wait (be careful about what period you need to make the calculation and what period
need for the answer) until you can afford the machine? (Assume the $350,000.00 is the price in th
future).
PV
$
200,000.00
i
8.50%
n
12
FV
$
350,000.00
x*n
months
x/n
years
Write it in words:
35 = 20*(1.0071)^(12*x)
35/20 = (1.0071)^(12*x)
LN(35/20) = LN((1.0071)^(12*n))
LN(35/20) = 12*n*LN(1.0071)
LN(35/20)/LN(1.0071) = 12*n
LN(35/20)/LN(1.0071)/12 = n
6.6 = n = years
FV/PV
(1+i/n)
LN(FV/PV)
LN((1+i/n))
LN(FV/PV)/LN((1+i/n))
79.2840605560736/n = x =

6.5915502516
1.75
1.007083333333330
0.5596157879
0.0070583644
79.2840605561 months
6.6070050463 years

acturing efficiency and you have

unded 12 times a year, how long
calculation and what period you
350,000.00 is the price in the

If you want to buy a $350,000.00 C & C Router Machine to improve manufacturing efficiency and you
$200,000.00 today that you can invest at an annual rate of 8.50% compounded 12 times a year, how
do you have to wait (be careful about what period you need to make the calculation and what period
need for the answer) until you can afford the machine? (Assume the $350,000.00 is the price in th
future).
PV
$
200,000.00
i
8.50%
n
12
FV
$
350,000.00
x*n
79.2840605561 months
x/n
6.6070050463 years

Write it in words:
35 = 20*(1.0071)^(12*x)
35/20 = (1.0071)^(12*x)
LN(35/20) = LN((1.0071)^(12*n))
LN(35/20) = 12*n*LN(1.0071)
LN(35/20)/LN(1.0071) = 12*n
LN(35/20)/LN(1.0071)/12 = n
6.6 = n = years
FV/PV
(1+i/n)
LN(FV/PV)
LN((1+i/n))
LN(FV/PV)/LN((1+i/n))
79.2840605560736/n = x =

If you have $200,000.00 to invest today at 8.50% compounded

you need $350,000.00 to buy the machine, you would have to w

6.5915502516
1.75
1.007083333333330
0.5596157879
0.0070583644
79.2840605561 months
6.6070050463 years

acturing efficiency and you have

unded 12 times a year, how long
calculation and what period you
350,000.00 is the price in the

oday at 8.50% compounded 12 a year and

achine, you would have to wait 6.607 years

The Higher The Discount Rate, The Lower The Present Value
$120.00

Present Value

$100.00

$80.00

0.00% Annual
Rate
2.50% Annual
Rate
5.00% Annual
Rate

$60.00

7.50% Annual
Rate
10.00% Annual
Rate

$40.00

12.50% Annual
Rate
$20.00

$0.00
0

5
Time

10

If you want to buy a $350,000.00 C & C Router Machine to improve manufacturing efficiency and
you can invest $250,000.00 today for the next 5 years (compounding 2 times a year), what
annual interest rate (APR) do you need to find (be careful about periods) so that you can afford
the machine? (Assume the $350,000.00 is the price in the future).
PV
$
250,000.00
n
2
x
5
FV
$
350,000.00
i/n
i
Write it in words:
FV/PV
FV/PV^(1/(n*x))
FV/PV^(1/(n*x))-1
0.0342196941293802*2

1.4
1.0342196941
0.0342196941 Half year rate
0.0684393883 Annual Rate

ove manufacturing efficiency and

ounding 2 times a year), what
t periods) so that you can afford
ice in the future).

If you want to buy a $350,000.00 C & C Router Machine to improve manufacturing efficiency and
you can invest $250,000.00 today for the next 5 years (compounding 2 times a year), what
annual interest rate (APR) do you need to find (be careful about periods) so that you can afford
the machine? (Assume the $350,000.00 is the price in the future).
PV
$
250,000.00
n
2
x
5
FV
$
350,000.00
i/n
3.42%
i
6.84%

Write it in words:
FV/PV
FV/PV^(1/(n*x))
FV/PV^(1/(n*x))-1
0.0342196941293802*2

If you want to buy a $350,000.00 C & C Router Machine to improve manufa

efficiency and you can invest $250,000.00 today for the next 5 years
(compounding 2 times a year), the annual interest rate (APR) you need to
6.84%.
1.4
1.0342196941
0.0342196941 Half year rate
0.0684393883 Annual Rate

ove manufacturing efficiency and

ounding 2 times a year), what
t periods) so that you can afford
ice in the future).

C Router Machine to improve manufacturing

250,000.00 today for the next 5 years
nnual interest rate (APR) you need to find is
6.84%.

Rule of 72 givens an estimate of what rate you need to

double Money.
PV
$1,000.00
FV
$2,000.00
n
12
x
5
n*x
Rule of 72: i/n aprox = 72/(n*x)
i = (72/(n*x)*n) =
estimate of rate needed to double $
Using RATE:
i check
FV check

Notice that this is the number 1.2 not 0.012

Rule of 72), you would hav
Notice that this is the number 14.4 not 0.144
Rule of 72), you would hav

Remember, this is an estimate.

s is the number 1.2 not 0.012. To get an estimate of the real rate (using the
Rule of 72), you would have to divide the result by 100.
s is the number 14.4 not 0.144. To get an estimate of the real rate (using the
Rule of 72), you would have to divide the result by 100.

s is an estimate.

Rule of 72 givens an estimate of what rate you

need to double Money.
PV
$1,000.00
FV
$2,000.00
n
12
x
5
n*x
60
Rule of 72: i/n aprox = 72/(n*x)
i = (72/(n*x)*n) =
estimate of rate needed to double $
Using RATE:
i check
FV check

Notice that this is the number 1.2 not 0.012. To g

Rule of 72), you would have to d
Notice that this is the number 14.4 not 0.144. To g
14.40
Rule of 72), you would have to d
0.144
13.94%
1.200

$2,045.65 Remember, this is an estimate.

mber 1.2 not 0.012. To get an estimate of the real rate (using the
72), you would have to divide the result by 100.
mber 14.4 not 0.144. To get an estimate of the real rate (using the
72), you would have to divide the result by 100.

What is the Annual Interest Rate?

Time Given as:
# of Compounding Periods per Year
Present Value
Future Value
Years
Total periods
Annual Interest Rate
Period Interest Rate
Check:

36 months
n
PV
FV
x
n*x
i
i/n

2
72,500.00
100,000.00

What is the Annual Interest Rate?

Time Given as:
# of Compounding Periods per Year
Present Value
Future Value
Years
Total periods
Annual Interest Rate
Period Interest Rate
Check:

36 months
n
PV
FV
x
n*x
i
i/n
$100,000.00

2
72,500.00
100,000.00
3
6
11.012%
5.506%

If we invest $250,000.00 with an annual rate of 5.50% compounded 2 times a year

for 15 years, what is the future value of the investment?
Present Value = PV
-$250,000.00
Annual Interest Rate = i
5.50%
Number of Compoundin Periods per Year = n
2
Years = x
15
Future Value = FV
Period Rate = i/n
Total Periods = n*x
Future Value = FV
If we borrow $250,000.00 with an annual rate of 5.50% compounded 2 times a
year for 15 years, what is the future value of the amount we owe?
Present Value = PV
$
250,000.00
Annual Interest Rate = i
5.50%
Number of Compoundin Periods per Year = n
2
Years = x
15
Future Value = FV
Period Rate = i/n
Total Periods = n*x
Future Value = FV

Check:
$564,150.43

Check:
($564,150.43)

If we invest $250,000.00 with an annual rate of 5.50% compounded 2 times a year

for 15 years, what is the future value of the investment?
Present Value = PV
-$250,000.00
Annual Interest Rate = i
5.50%
Number of Compoundin Periods per Year = n
2
Years = x
15
Future Value = FV
Period Rate = i/n
0.0275
Total Periods = n*x
30
Future Value = FV
$564,150.43
If we borrow $250,000.00 with an annual rate of 5.50% compounded 2 times a
year for 15 years, what is the future value of the amount we owe?
Present Value = PV
$
250,000.00
Annual Interest Rate = i
5.50%
Number of Compoundin Periods per Year = n
2
Years = x
15
Future Value = FV
Period Rate = i/n
0.0275
Total Periods = n*x
30
Future Value = FV
-$564,150.43

Check:
$564,150.43

Check:
($564,150.43)

4.1
PV =
i=
n=
x=
FV =
FV =

4.2
1000
8.00%
1
4

Age =
Future Age =
Age Difference = x =
FV =
i=
n=
x=
PV =
PV =

19
25
$ 100,000.00
11.00%
1

4.3
PV =
n=
x=
FV =
i=
i=
Check with Rule of 72

4.4
$

1.00
1
12
2.00

PV =
i=
n=
FV =
x=
x=

10,000.00
7.00%
1
20,000.00

4.4
PV =
i=
n=
FV =
n*x =
x=

10,000.00
7.00%
1
30,000.00

4.1
PV =
i=
n=
x=
FV =
FV =

1000
8.00%
1
4
$ 1,360.49
$1,360.49

4.2
Age =
Future Age =
Age Difference = x =
FV =
i=
n=
x=
PV =
PV =

19
25
6
$ 100,000.00
11.00%
1
6
53464.083609
($53,464.08)

4.3
PV =
n=
x=
FV =
i=
i=
Check with Rule of 72

4.4
$

1.00
1
12
2.00
5.95%
5.95%
6

PV =
i=
n=
FV =
x=
x=

10,000.00
7.00%
1
20,000.00
10.2447683511
10.2447683511

4.4
FV = PV*(1+i/n)^(n*x)
2 = 1*(1+i)^12
2 = (1+i)^12
2^(1/12)-1 = i

PV =
i=
n=
FV =
n*x =
x=

10,000.00
7.00%
1
30,000.00
16.237573665
16.237573665

FV = PV*(1+i/n)^(n*x)
2 = 1.07^x
LN2/LN1.07 = x
FV = PV*(1+i/n)^(n*x)
3 = 1.07^x
LN3/LN1.07 = x

4.1

4.2

4.3

4.1

4.2
4.3

Compounding is a means to get rich, as long as you have prudent saving habits. The definition of Com
process of accumulating interest in an investment over time to earn more interest."

Discounting is like "interest backwards". If you know a future value amount and you want to know wha
given an appropriate discount rate (same as interest rate), you make a Present Value calculation (PV =
The Present Value calculation is the Future Value calculation, but backwards. With the Future Value ca
the interest to the Present Value amount to get the Future Value amount; time is going forward. Howe
Value calculation you take out (remove) all the interest from the Future Value amount to get the Prese
is going Backwards. The definition of Discounting is: "Using the appropriate discount rate, you discou
value amount to get the Present Value amount" or "what is the current value of future cash flows give
discount rate".

As you increase the length of time involved in a future value calculation (assuming a positive rate of r
value increases or the present value decreases. The time variable, or "input", is the most important va
Value and Present Value calculations because it has the most effect on the resultant number as compa
variables.

As you increase the Period Interest Rate, i/n, the Future Value amount increases; whereas, the Present

1st City
i
PV
x
FV

1st City FV
2nd City FV
Extra Interest Due To Compounding

0.07
8000
10

2nd City
i
n
PV
x
FV
FV

0.08
1
8000
10

1st City
i

0.07

PV
x
FV

8000
10
$13,600.00

1st City FV
2nd City FV
Extra Interest Due To Compounding

$13,600.00
$17,271.40
$3,671.40

2nd City
i
n
PV
x
FV
FV

textbook answer looks incorrect.

0.08
1
8000
10
$17,271.40
$17,271.40

extbook answer looks incorrect.

No.
1
2
3
4

PV
$
$
$
$

Years
3,150.00
8,453.00
89,305.00
227,382.00

6
19
13
29

Annual Interest
# Compound
Rate
Periods
18.00%
6.00%
11.00%
5.00%

1
1
1
1

FV

FV

No.
1
2
3
4

PV
$
$
$
$

Years
3,150.00
8,453.00
89,305.00
227,382.00

6
19
13
29

Annual Interest
# Compound
Rate
Periods
18.00%
6.00%
11.00%
5.00%

1
1
1
1

FV
$
$
$
$

FV
8,503.60
25,575.39
346,796.33
935,935.14

$8,503.60
$25,575.39
$346,796.33
$935,935.14

No. PV
1
2
3
4

PV

Years
12
4
16
21

Annual Interest
# Compound
Rate
Periods
4.00%
9.00%
12.00%
11.00%

1
1
1
1

FV
$
$
$
$

17,328.00
41,517.00
790,382.00
647,816.00

No. PV
1
2
3
4

($10,823.02)
($29,411.69)
($128,928.43)
($72,388.42)

PV
$
$
$
$

Years
10,823.02
29,411.69
128,928.43
72,388.42

12
4
16
21

Annual Interest
# Compound
Rate
Periods
4.00%
9.00%
12.00%
11.00%

1
1
1
1

FV
$
$
$
$

17,328.00
41,517.00
790,382.00
647,816.00

No.
1
2
3
4

PV
$
$
$
$

Annual Interest
Rate

Years
715.00
905.00
15,000.00
70,300.00

6
7
18
21

Annual Interest Rate

# Compound
Periods
1
1
1
1

FV
$
$
$
$

1,381.00
1,718.00
141,832.00
312,815.00

No.
1
2
3
4

PV
$
$
$
$

Years
715.00
905.00
15,000.00
70,300.00

6
7
18
21

Annual Interest
Annual Interest
Rate
Rate
11.60%
11.60%
9.59%
9.59%
13.29%
13.29%
7.37%
7.37%
FV = PV*(1+i/n)^(n*x)
715 = 1381*(1+i/n)^(6)
(715/1381)^(1/6)-1

# Compound
Periods

+i/n)^(n*x)
1*(1+i/n)^(6)

1
1
1
1

FV
$
$
$
$

1,381.00
1,718.00
141,832.00
312,815.00

No.
1
2
3
4

PV
$
$
$
$

Years
250.00
1,941.00
32,805.00
32,500.00

Years

Annual Interest
Rate
9.00%
7.00%
12.00%
19.00%

# Compound
Periods
1
1
1
1

FV
$
$
$
$

1,105.00
3,700.00
387,120.00
198,212.00

No.
1
2
3
4

PV
$
$
$
$

250.00
1,941.00
32,805.00
32,500.00

Years
17.245061784
9.5350635878
21.778720657
10.394151773

Annual Interest
Years
Rate
17.245061784
9.00%
9.5350635878
7.00%
21.778720657
12.00%
10.394151773
19.00%

# Compound
Periods
1
1
1
1

FV
$
$
$
$

1,105.00
3,700.00
387,120.00
198,212.00

Total Cost Education = FV =

x=
PV =
n=
i/n =
i=
Words:

320000
18
50000
1

Total Cost Education = FV =

x=
PV =
n=
i/n =
i=

Words:

320000
18
50000
1
10.8633%
0.1086329349

10.8633%
0.1086329349

To allow our current investment of $50,000.00 to cover the our child's

years, we would have to earn an annual return of 10.8
FV = PV*(1+i/n)^(n*x)
(FV/PV)^(1/(n*x))-1

50,000.00 to cover the our child's eduction costs in 18

e to earn an annual return of 10.86%.

Annual Rate = i =
n=
PV1 =
FV1 =

0.07
1
1
2

x*n =
x=
Annual Rate = i =
n=
PV2 =
FV2 =
x*n =
x=
Words:
Words:

0.07
1
1
4

FV = PV*(1+i/n)^(n*x)
LN(FV/PV)/LN(1+i/n) = n*x
check

FV check

check

FV check

Annual Rate = i =
n=
PV1 =
Annual Rate = i =
n=
PV1 =
FV1 =
x*n =
x=
Annual Rate = i =
n=
PV2 =
FV2 =
x*n =
x=

Words:
Words:

0.07
1
1
0.07
1
1
2
10.24477
10.24477
0.07
1
1
4
20.48954
20.48954

To double my investment at an Annual R

to invest for 10.24y
To quadruple my investment at an Annu
have to invest for 20.4

FV = PV*(1+i/n)^(n*x)
LN(FV/PV)/LN(1+i/n) = n*x
check
FV check
10.24477
$2.00

check
FV check
20.48954
$4.00

y investment at an Annual Rate of 7.00% I would have

to invest for 10.24years.
e my investment at an Annual Rate of 7.00% I would
have to invest for 20.49years.

Year 2
Year 1
Year Difference = x =
PV =
FV =
n=
i/n =
i=

1893
2009
$1.00
$6,450.00
1

check

Year 2
Year 1
Year Difference = x =
PV =
FV =
n=
i/n =
i=

1893
2009
116
$1.00
$6,450.00
1
7.855186%
0.07855186

check
0.078552

Unfunded Pension Liability = FV =

Must be paid in = years = x =
Discount Rate = i =
n=
n*x =
i/n =
Present Value of Liabilitiy (Lump Sum Value today that stock Analysts
can subtract from current firm market value worth) = PV =
Words:

$ 750,000,000.00
25
0.08
1
25
0.08

check

Unfunded Pension Liability = FV =

Must be paid in = years = x =
Discount Rate = i =
n=
n*x =
i/n =
Present Value of Liabilitiy (Lump Sum Value today that stock Analysts
can subtract from current firm market value worth) = PV =

Words:

$ 750,000,000.00
25
0.08
1
25
0.08
($109,513,428.68)

check
109,513,428.68

The financial analyst would like to know what the future liability is worth
today so it can help them to calculate what the firm's market value is
worth today. The Present Value of the future Unfunded Pension Liability is
$109,513,428.68.

FV = Lottery value in future =

x=
n=
Discount Rate =
PV =
Words:

2,000,000.00
80
1
0.09

Check

FV = Lottery value in future =

x=
n=
Discount Rate =
PV =
Words;

2,000,000.00
80
1
0.09
($2,027.26)
The present value of this future
lottery payout is $2,027.26.

Check
2027.263

Part 1
PV =
i=
n=
x=
FV =

$5,000.00
0.105
1
45

Part 2
PV =
i=
n=
x=
FV =

$5,000.00
0.105
1
35

Words:
Check

Check

Part 1
PV =
i=
n=
x=
FV =

Words:

$5,000.00
0.105
1
45
$446,963.97

Part 2
PV =
i=
n=
x=
FV =

$5,000.00
0.105
1
35
$164,683.37

The investment Strategy that this suggests is that the most important variable in
investment strategy is the Total Number of Periods. For 10 extra years, we get
$282,280.60 extra dollars of return.
Check
446963.9694

Check
164683.366

rtant variable in
a years, we get

PV =
x=
i=
n=
FV =

13000
6
0.09
1

Words:

Check:

Time Line
0

2
$13,000.00

8
$21,802.30

years

PV =
x=
i=
n=
FV =

13000
6
0.09
1
$21,802.30

Words:

If we receive $21,802.30 in 2 years, and then we wait 6 years, our FV will be $21,802.30
(Remember: 8 - 2 = 6).

Check:
21802.3014

Time Line
0

2
$13,000.00

r FV will be $21,802.30

8
$21,802.30

years

PV =
FV =
Months =
Years = x =
n=
n*x =
i/n =
i=
Words:

1
4
24
4

(3 month rate) , then 3 + 3 + 3 + 3 = 12 months

<<== Three Month Rate
<<== Annual Rate

Check:

Check:

PV =
1
FV =
4
Months =
24
Years = x =
2
n=
4
(3 month rate) , then 3 + 3 + 3 + 3 = 12 months, so 4 total period
n*x =
8
i/n =
18.921% <<== Three Month Rate
Check:
Check:
i=
75.683% <<== Annual Rate
0.189207
4

Words:

First, if the problems gives us time in months, we have to determine the

years. After we do that the problem is straight forward. The 3-month rate to
quadruple your investment would be 18.92%

hs, so 4 total period in a year

i/n =
n=
i=
PV =
FV =
n*x =
x=
Words:

0.35%
12
$1,800.00
$3,500.00

Check:
months
years

i/n =
n=
i=
PV =
FV =
n*x =
x=

0.35%
12
0.042
$1,800.00
$3,500.00
190.325524137 months
15.8604603448 years

Words:

It would take 15.86 years for the investment to grow to $3,500.00 given a monthly
Rate of 0.35%.

Check:
190.3255

00 given a monthly

FV =
n=
i/n =
i=
x=
n*x
PV =
Words:

$75,000.00
12
0.42%
10

FV =
n=
i/n =
i=
x=
n*x
PV =
Words:

$75,000.00
12
0.42%
5.040%
10
120
($45,356.05)
The Present Value of $75,000.00 given a monthly rate of 0.42% is $45,356.05.

42% is $45,356.05.

1st
FV =
x=
i=
n=
PV =

1,000,000.00
45
11.00%
1

FV =
x=
i=
n=
PV =

2nd
1,000,000.00
45
5.00%
1

Words:
Check:

Check:

1st
FV =
x=
i=
n=
PV =

Words:

1,000,000.00
45
11.00%
1
-9,129.90

FV =
x=
i=
n=
PV =

2nd
1,000,000.00
45
5.00%
1
-111,296.51

I want to be a millionaire when I retire, so with either option, I am going to invest earlier in
life instead of later.

g to invest earlier in