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Typically for present value you need to use the rate for each year you are discounting.
Here is the rate table.
Hello I see you are in the chat
Hi, yes I am. I am having trouble understand future/present value. I know there are different tables, but I am unsure as to know when to use which.
Well for present value you would use the one I just sent.
Does that make sense?
number of periods do you use when working with the following rates and years?
(a) 8% compounded quarterly for 4 years i = ______% n = ______
(b) 12% compounded annually for 5 years i = ______% n = ______
(c) 6% compounded semiannually for 3 years i = ______% n = ______
(d) 12% compounded monthly for 2 year i = ______% n = ______
much will Sam have in the account after 5 years, assuming he makes no additional deposits?
Balance of account = $_______________
compounded annually. How much will Bob have in the account at the end of 6 years?
compounded semiannually in order to meet her goal?
Current deposit = $_______________
year after Mary borrows the money.
Amount borrowed = $_______________
15 years. What is the annual rate of interest for this investment?
i = ______%
accumulate $10,000. How many years must Brink wait to accumulate $10,000?
n = ______ years
the lump sum payment?
Lump Sum = $_______________
Those are sum examples, I'll look at the chart
I do know that you look at the year and percent to find the number to multiply by. I guess my question is when reading these problems how to interpret whether it is present or future? In order to know which table to get the numbers from
So for the Sam Riggs problem you want to know the future value because that is in the future.
Same with Bob Thompson
Ann Summer is present value as you know the amount in the future
XXXXX XXXXX is present value
Are you getting the idea?
I think so. Now when it comes to calculations- how do you decide when its an annuity?
An annuity is a fixed payment at the same amount.
If you have excel here is a sheet that has the present value and future value formulas.
as an example
I do have excel
Take a look at the formulas
Okay, I haven't used excel a whole lot, but I think I kind of understand what you are doing.
So for Bob T you should come out to $4,867
Sorry I meant Sam Riggs
For Bob T you should have $13,401
Are you getting the idea?
So for Bob T would it be future value and annuity?
Do you have any other questions on which one to use?
When calculating annuity and lump sum is the only real difference going to be which appendix you are looking at?
Okay, I think I have a better understanding. I guess the only thing is with some of the wording on the different questions I feel like can be tricky when trying to distinguish whether it is future or present. Any tips on that? I obviously know if they say at the end of x amount of years- thats future.
Think of it this way.
If they say you will have $20,000 in ten years you need to think back to present value
If they say you have $20,000 right now and what will it be in the future...You need to think future value
When you read the problem look at where the money is. Is it in the future or present and then work out the opposite.
Okay so that's problem. I feel like I am looking too much into the problems. When I read you will have "$20,000 in ten years" that makes me think future, because I don't currently have it.
That is correct and you need to figure the present value.
For the appendix that you found- they all are going to be the same I'd assume? Meaning, where you found this- should appear in other accounting textbooks/sites?
Yes that is standard
do you need anything else?
I think that should be all. I am going to just keep working away at practice problems. Thank you.
Please provide a positive rating. I really enjoyed helping you tonight. Regards Dave