question archive Calculate the value where you find question mark "?"
Subject:AccountingPrice:4.86 Bought11
Calculate the value where you find question mark "?". All values should be determined up to four decimal places
Time value of money
PV r n FV Interest amount COMPOUND
A 50,000 10.50% 5 years ? N/A monthly
B ? 9% 15 years 2,500,000 N/A quarterly
C 140,000 ? 3 years 200,000 60,000 semi-annual
D 200,000 7.50% ? 400,000 200,000 quarterly
E ? 12% 10 years N/A 500,000 yearly
We know
FV = PV (1+r/t)nt
where FV is future value
PV is present value
r is interest rate (in p.a)
t is number of times interest rate is to be compounded
n is time (in years)
Step-by-step explanation
Case A
n = 5 years
t= 12 (since compounding is monthly i.e. 12 times in year)
r = 10.50%
So,
FV = 50,000 x [1+(10.50%/12)]5x12
FV = 50,000 x (1+0.0088)60
FV = 84330.1491
Case B
n = 15 years
t= 4 (since compounding is quarterly)
r = 9%
So,
FV = PV x [1+(9%/4)]15x4
FV = PV x (1+0.0225)60
2,500,000/3.8001 = PV
PV = 657871.4022
Case C
n = 3 years
t= 2 (since compounding is semi annual)
r = r% (say)
So,
200,000 = 140,000 x [1+(r%/2)]3x2
1.4286 = (1+(r%/2)6
On solving r = 12.2497%
Case D
n = n years (say)
t= 4 (since compounding is quarterly)
r = 7.50%
So,
400,000 = 200,000 x [1+(7.50%/4)]4n
2 = (1+0.0188)4n
2 = (1.0188)4n
On solving n = 9.3284 years
Case E
n = 10 years
t= 1 (since compounding is yearly)
r = 12%
Interest = 500,000
We know
PV + Interest = FV
PV + 500,000 = FV
So,
FV = PV x [1+(12%/1)]10x1
FV = PV x (1.12)10
FV = 3.1058 PV
Substituting FV = PV + 500,000
We have,
PV + 500,000 = 3.1058 PV
2.1058 PV = 500,000
PV = 237,439.4529