TEXAS TECH UNIVERSITY
Time Value of Money 3 A Assignment -
Future Value and Present Value
Fall 2023 TTU Foundations of Finance (BA-3303-D02) Full Term
Author: Ayan Paul Instructor: Keith Trent
1. If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an
account that pays an annual interest rate of 14%?
PV = ?
FV = $140,000
r =14%
n =13
PV = FV / (1+ r) n
PV =140,000 / (1+0.14)13
PV = 25,489.71 ≈ 25,490
2. What will $247,000 grow to be in 9 years if it is invested today in an account with an
annual interest rate of 11%?
FV=?
PV = $247,000
r =11%
n =9
FV= PV x (1+r)n
FV = 247,000 x (1+ 11%)9
FV = 631,835.1 ≈ 631,835
3. What is the value today of a future amount of $468,000 in 12 years if it is invested in an
account with an annual interest rate of 8%?
PV = ?
FV = $468,000
r = 8%
n =12
PV = FV / (1+ r) n
PV =468,000 / (1+0.08)12
PV = 185,849.239 ≈ 185,849
4. If you wish to accumulate $197,000 in 5 years, how much must you deposit today in an
account that pays a quoted annual interest rate of 13%?
PV = ?
FV = $197,000
r = 13%
n =5
PV = FV / (1+ r)n
PV = 197,000 / (1+0.13)5
PV = 106,923.71 ≈ 106,924
5. An investment earning simple interest is preferred over an investment earning compound
interest because the simplicity adds value.
False. An investment earning compound interest is preferred over an investment
earning simple interest because compound interest allows your money to grow
faster.
6. The present value of a single future sum
Correct option is D. The present value of a single future sum decreases as the
discount rate increases.
7. The present value of $1,000 to be received in 5 years is ________ if the discount rate is
12.78%.
PV = ?
FV = $1,000
r = 12.78%
n =5
PV = FV / (1+ r)n
PV = 1,000 / (1+0.1278)5
PV = 548.07 ≈ $548
So the correct option is C
8. Assuming two investments have equal lives, a high discount rate tends to favor
Correct option is A. the investment with large cash flow early.
9. What is the present value of $11,463 to be received 7 years from today? Assume a
discount rate of 3.5% compounded annually and round to the nearest $1.
PV = ?
FV = $11,463
r = 3.5%
n =7
PV = FV / (1+ r)n
PV = 11,463 / (1+0.035)7
PV = 9,009.8 ≈ $9,010
So the correct option is D
10. What is the present value of $359,000 that is to be received at the end of twenty three
years, the discount rate is 11% and annually discounting occurs?
PV = ?
FV = $359,000
r = 11%
n =23
PV = FV / (1+ r)n
PV = 359,000 / (1+0.11)23
PV = 32,558.62 ≈ $32,559
