Single cash flows

Negative and positive numbers are shown on the timeline, represents cash that has been received and also cash that has been paid out. Question 2 The present value is the amount a future money flow is worth currently (Cornett, Adair, & Nofsinger, 2016, p. The future value is the value of an investment after many periods. (Cornett, Adair, & Nofsinger, 2016, p. The Present value and Future value are similar because they both affect one another. 00 x (1 + 0. 00x (1. 00 x 2. 740 Recalculate the savings account balance, using a 6 percent interest rate, and then using 8 percent as the interest rate. 6 percent interest rate FVN = PV x (1 + i) N FV11 = $150. 00 x (1+0. 00 x (1. 00 (b) 6 percent in the second year, and FVN = PV x (1+ i) FVN = $378. 00 x (1+0. 00 x (1. 360 13-percent discount rate. PV = FVN / (1 + i) N PV = $850.

400 Describe the relationship between changes in interest rates and the ensuing changes currently in the present values. The present value is much lower interest rates are high. Question 7 What annual rate of return is earned on a 5,000 dollars’ investment when it yields to $9,500 in five years’ time? (FVN / PV) 1/N – 1. Question 10. The mortgage payments at the start of an amortization event are nearly all interest and causes little principal. As time passes, the amount paid will amount less towards the interest and more towards the principal balance. The main reason for the tax benefit of interest is greater for longer-term loans since in the longer the term more interest is paid in the loan, therefore creating more interest payments in the start of longer-term.