Compute and Interpret Present and Future Values
• Laux, J. (2010). Topics in finance part IV: Valuation.
• Lucko, G. (2013). Supporting financial decision-making based on time value of money with singularity functions in cash flow models. Construction Manag
• Mayers, T. R. (2018). Microsoft Excel as a Financial Calculator Part I.
Instructions
Answer the following questions (for quantitative questions, show your work):
1. How does the present value of a lump sum compare to the present value of an annuity?
2. How does the future value of an ordinary annuity compare to the future value of an annuity due?
3. How does the present value of an annuity compare to the present value of an annuity due?
4. What is the value today of $500 received in 3 years if the going rate of interest is 10% per year?
5. An individual has $3,000 today. What will that be worth in 7 years if the going rate of interest is 4% per year?
6. What is the present value of $250 received at the end of each year for the next 8 years if the interest rate is 4.5% per year?