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HELP!!! Present and future values for different interest rates Find the following value. Compounding/discounting occurs annually a. An initial $500 compounded for 10 years at 6%
500 x (1.06) ^10 =895.42
b. An initial $500 compounded for 10 years at 12%
500 x (1.12) ^10) = 1552.92
c. The present value of $500 due in 10 years at 6%
500/ (1.06) ^10 = 279
d. The present value of $1,552.90 due in 10 years at 12% and at 6%
1552.90/ (1.12) ^10 =500
1552.90/ (1.06) ^10 = 867
e. Define present value and illustrate it using a time line with data from Part
As the longer the time line the present value will be less and future value will be high. You can see that when the number of years for present value and future value were same in b and d the future value of 500 equal to 1552.90 and present value of 1552.9 = 500.
d. How are present values affected by interest rates?
More the interest rate higher the future value and the present value will be on the lower side. You can see in d that when the interest rate was 12% the present value was 500 and when it was lower the present value was higher.
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