Excel Template

STP #5.5. You just bought a corporate bond at $863.75 today. In five years the bond will mature and you will receive $1,000. What is the rate of return on this bond?

Price of bond today $ 863.75 Number of years till bond matures 5Future value of bond $1,000

PV n FVIF i% FV

Prove the future value $1,000

Trial & Error Method to solve for i% that results in a FV of $1,000.

STP #5.4. Twenty-five years ago, Amanda Carter investec $10,000 in an account paying an annual interest rate of 5.75 percent. What is the value of the investment today? What is the interest on interest earned on this investment?

Amount invested 25 years ago $10,000 Number of years invested 25Annual interest rate 5.75%

PV n i% FV Value of investment today

interest per year

Sinple interest over 25 years

Interest on Interest

STP #5.3. What is the future value of an investment of $3,000 after three years with compounding at the following rates and frequencies:

a. 8.75 percent compounded monthlyb. 8.625 percent compounded dailyc. 8.5 percent compounded continuously

Investment $3,000 Number of years 3

PV 3000i% n m 12FV

PV i% n m 365 FV

PV i%

n

m 100000

FV

STP #5.2. Michael Carter is expecting an inheritance of $1.25 million in four years. If he had the money today, he could earn interest at an annual rate of 7.35 percent. What is the present value of this inheritance?

Future value of inheritance expected $1,250,000 Number of years until inheritance 4Annual interest rate 7.35%

FV

n

i%

PV = FV(FVIF)

STP #5.1. Santiago Hernandez is planning to invest $25,000 in a money market account for two years. The account pays interest of 5.75 percent compounded on a monthly basis. How much money will Santiago Hernandez have at the end of two years?

Amount of investment $ 25,000 Term (years) 2Interest rate per year 5.75%Frequency of compounding per year 12

Monthly Compounding

PV

n

i%

m

FV = PV(FVIF)

FV

5.37 You will be graduating in two years, and are thinking about your future. You know that you will want to buy a house five years after you graduate and that you will want to put down $60,000. As of right now, you have $8,000 in your savings account. You are also fairly certain that once you graduate, you can go work in the family business and earn $32,000 a year, with a 5 percent raise every year. You plan to live with your parents for the first two years after graduation, which will enable you to minimize your expenses and put away $10,000 each year. The next three years, you will have to live out on your own as your younger sister will be graduating from college and has already announced her plan to move back into the family house. Thus, you will be able to save only 13 percent of your annual salary. Assume that you will be able to invest savings from your salary at 7.2 percent. At what interest rate will you need to invest the current savings account balance in order to achieve your goal?

Hint: Draw a time line that shows all the cash flows for years 0 through 7. Remember, you want to buy a house seven years from now and your first salary will be in year 3.

Number of years until graduation 2Number of years until you buy a house 7Down payment required on house $60,000 Current savings $8,000 Annual income in family business $32,000 Annual raise in salary 5%Annual savings after graduation while living at home $10,000 Number of years after graduation that you will live at home 2 Annual saving (as a percent of salary)after moving out 13%Rate of return on invested savings from salary 7.20%

YearCash flow 0 1 2 3 4 5 6 7 Future valueDown payment required on house $60,000.00Current saving $8,000 Salary $32,000 Annual Saving $10,000 $10,000 PVIF @ 7.20% 0.9328358209 0.87018266875 0.811737564128566 0.75721787699 0.7063599599

$9328.36 $8701.83 NPV FV = PV(FVIF) Amount that current savings account balance must amount to to reach down payment goal

PV $8,000 FV n 7

FV = PV (1+ i%)^n18984.93 = 8,000(1+i%)^7FV/PV 2.3731 = (1+i%)^7Raise 2.3731 to 1/7th power

Rate of return that current savings will have to earn to reach goal i%

5.35 Sam Bradford, a number 1 draft pick of the St. Louis Rams, and his agent are evaluating three contract options. Each option offers a signing bonus and a series of payments over the life of the contract. Bradford uses a 10.25 percent rate of return to evaluate the contracts. Given the cash flows for each option, which one should he choose?

10.25% 10.25% 10.25%

Year Option A Option B Option C

A PVIF PV B PVIF PV C PVIF PV0 $3,100,000 $4,000,000 $4,250,000

0 1 $650,000 $825,000 $550,000

1 2 $715,000 $850,000 $625,000

2 3 $822,250 $925,000 $800,000

3 4 $975,000 $1,250,000 $900,000

4 5 $1,100,000 $1,000,000

5 6 $1,250,000

6

Interest rate 10.25%

Cash Flow Type

Signing Bonus

Annual Salary

Annual Salary

Annual Salary

Annual Salary

Annual Salary

Annual Salary

5.36 Surmec, Inc., has reported sales of $2.1 million last year. The company’s primary business line is manufacturing of nuts and bolts. Since this is a mature industry, the analysts are certain that the sales will grow at a steady rate of 7 percent a year. The company reports net income that represents 23 percent of sales. The management would like to buy a new fleet of trucks but can only do so once the profit reaches $620,000 a year. At the end of what year will they be able to buy the new fleet of trucks? What will the sales and profit be that year?

Last year's sales $2,100,000 Annual growth rate of sales expected 7%Net income as a percent of sales 23%Target net income needed before fleet of trucks can be purchased $ 620,000

Last year’s net income = Last Year’s sales * Net Income as % of sales PV FV i%FV = PV(1+i%)^n620,000 = 483,000(1.07)^nFV/PV 1.2836 = (1.07)^nTrial & Error Method(1.07) ^ 3.69 = 1.28359

Number of years after which the fleet of truck can be purchased = n =

Sales of the year after which trucks can be purchased = FV = PV (FVIF) PV i%4 n = round up to 4.0

Profit of the year after which trucks can be purchased = #VALUE!

5.34 When you were born your parents set up a bank account in your namewith an initial investment of $5,000. You are turning 21 in a few days and will have access to all your funds. The account was earning 7.3 percent for the first seven years then the rates went down to 5.5 percent for six years. The economy was doing well at the end of the 1990s and your account was earning 8.2 percent for three years in a row. Unfortunately, the next two years you earned only 4.6 percent. Finally, as the economy recovered, your return jumped to 7.6 percent for the last three years.

a. How much money was in your account before the rates went down drastically (end of year 16)?

b. How much money is in your account now (end of year 21)?c. What would be the balance now if your parents made another

deposit of $1,200 at the end of year 7?

Initial investment = $5,000 Age at time of investment = 0 yearsCurrent age = 21 yearsInterest rate (years 1-7)= 7.30%Interest rate (years 8-13)= 5.50%Interest rate (years 14-16)= 8.20%Interest rate (years 17-18)= 4.60%Interest rate (years 19-21)= 7.60%

n i% FVFV at the end of year 7 7 7.30% $1,200.00FV at the end of year 8 8 5.50% $1,266.00FV at the end of year 9 9 5.50% FV at the end of year 10 10 5.50% FV at the end of year 11 11 5.50% FV at the end of year 12 12 5.50% FV at the end of year 13 13 5.50% FV at the end of year 14 14 8.20% FV at the end of year 15 15 8.20% FV at the end of year 16 16 8.20% [a] FV at the end of year 17 17 4.60% FV at the end of year 18 18 4.60% FV at the end of year 19 19 7.60% FV at the end of year 20 20 7.60% FV at the end of year 21 21 7.60% [b]

FV at the end of year 21 FV of additional deposits from year 7 thru year 21 FV at the end of year 21 [c]

5.33 You have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2 percent semiannually, or you can wait, enjoy some of it, and invest $11,000 in your brother’s business in two years. Your brother is promising you a return of at least 10 percent on your investment. Whichever alternative you choose, you will need to cash in at the end of ten years. Assume your brother is trustworthy and both investments carry the same risk. Which one will you choose?

Alternative ACash available for investment = $12,000 Rate of return on mutual fund= 8.20%Compounding frequency (per year)= 2Term of investment = 10 years

Alternative BCash available for investment after 2 years = $11,000 Rate of return promised by brother = 10%Compounding frequency (per year)= 1Term of investment= 8 years

Annual Compounding Semi-annual compoundingPV i% m n FV

PV

i%

m

n

FV

Choose alternative A

5.32 Patrick Seeley has $2,400 that he is looking to invest. His brother approached him with an investment opportunity that could double his money in four years. What interest rate would the investment have to yield in order for Patrick’s brother to deliver on his promise?

Patrick's investment = $2,400 Period of investment = 4 yearsValue at end of term= $4,800

PVnFV

FV = PV(FVIF)FV/PV = (1+ i%)^nFV/PV

2.000 = (1+i%)^4

Raise 2.0 to 1/4th power

1.1892 = (1 + i%)

i% =

5.31 You have $2,500 you want to invest in your classmate’s start-up business. You believe the business idea to be great and hope to get $3,700 back at the end of three years. If all goes according to plan, what will your return on investment be?

Investment needed= $ 2,500 Period of investment= 3 yearsExpected terminal value= $3,700

PVn

FV

FV = PV(FVIF)

3,700= 2,500(1+I%)^3

FV/PV

1.48 = (1+I%)^3

RAISE 1.48 to 1/3rd power

i% =

5.22so she can collect $5,500 at the end of three years. Which investment should she make given the following choices:

a. 4.2 percent compounded dailyb. 4.9 percent compounded monthlyc. 5.2 percent compounded quarterlyd. 5.4 percent compounded annually

Amount of money she would like to have after 3 years= $5,500 Term of investment = 3 years

a. Interest rate= 4.20% Compounding frequency (per year)=

Amount of investment required today =

b. Interest rate= 4.90% Compounding frequency (per year)=


c. Interest rate= 5.20% Compounding frequency (per year)=


d. Interest rate= 5.40% Compounding frequency (per year)=


She should invest at 5.4% compounded annually i.e. option D.

Multiple compounding periods: Samantha is looking to invest some money,

so she can collect $5,500 at the end of three years. Which investment

m FV Compounding frequency (per year)= 365 i%

n m PV

Compounding frequency (per year)= 12 FV i% n m

PV

FV Compounding frequency (per year)= 4 i%

n m PV

FV

Compounding frequency (per year)= 1 i% n m PV

Samantha is looking to invest some money,

5.21under each of the following rates and periods:

a. 8.9 percent compounded monthly for five years.b. 6.6 percent compounded quarterly for eight years.c. 4.3 percent compounded daily for four years.d. 5.7 percent compounded continuously for three years.

Future value = $3,500 PV = FV(PVIF)

a. Interest rate = 8.90% i% Term = 5 years n Compounding frequency (per year)= 12 mPresent value = PV

b. Interest rate = 6.60% i% Term = 8 years n Compounding frequency (per year)= 4 mPresent value = PV

c. Interest rate = 4.30% i% Term = 4 years n Compounding frequency (per year)= 365 mPresent value = PV

d. Interest rate = 5.70% i% Term = 3 years n Compounding frequency (per year)= 100000 mPresent value = PV

Multiple compounding periods: Find the present value of $3,500

5.29.a bonus of $1,820 today or wait two years and receive $2,100 then. She can invest at 6 percent. What should she do?

Bonus offered today = PV = $ 1,820 Bonus after 2 years = FV = $ 2,100 Rate of return = I = 6%Period = n= 2 years

PV FV i% n

FV=PV(FVIF)FV = Since 2,044.95 < 2,100.00Do not accept the bonus today

PV = FV (PVIF)PV= Accept the alternative since it has a higher PV

Present value: Caroline Weslin needs to decide whether to accept

5.25.of $1.3 million a year. Management wants to go public but has to wait until the sales reach $2 million. If sales are expected to grow at a steady 12 percent annually, when is the earliest that Neon Lights can go public?

Current annual sales = $1,300,000 Sales level at which they can go public= $2,000,000 Expected annual growth rate of sales = 12%How long will it take for them to reach their goal?

Time = 3.8 yearsAlternative method:

==> n = Ln(FV/PV)/Ln(1+r)

n= 3.8 years

PV

FV

g

FV=PV(1+g)^n

FV/PV

1.5384 = (1.12)^n

Trial & Error Method

1.12 raised to the 3.8 power =

n =

Time to grow: Neon Lights Company is a private company with sales

Since FV=PV*(1+r)n

E12

5.24.and you will withdraw the money only once the balance is $1,000. If the bank pays 5 percent interest, how long will it take you to attain your goal?

Present value of deposit today = $850 Amount of withdrawal required = $1,000 Interest rate paid by bank per year= 5%How long will it take to reach your goal?

Time = 3.33098 yearsAlternative method:

==> n = Ln(FV/PV)/Ln(1+r)

n= $3.33 years

PV

FV

i%

FV=PV(1+i%)^n

FV/PV

1.1764 = (1.05) ^ n


1.05 raised to 3.331 = 1.176414492145

n years

Time to grow: You are able to deposit $850 in a bank CD today,

Since FV=PV*(1+r)n

E11

5.23.of $1.125 million. If the company expects its sales to grow at 6.5 percent annually, how long will it be before the company can double its sales? Use a financial calculator to solve this problem.

Year 0 Sales 1,125,000Growth rate of sales 6.50% per year

PV g FV

FV=PV(1+i%)^n

FV/PV

2.0 =(1.065)^n


n = years

Time to grow: Zephyr Sales Company has currently reported sales

5.28.reported a net income of $419 million this year. Analysts expect the company’s earnings to be $1.468 billion in five years. What is the expected growth rate in the company’s earnings?

Year 0 Net Income = 419,000,000 PV

Year 5 Net Income = 1,468,000,000 FV

Number of years = 5 N

FV = PV(1+i%)^nFV/PV = (1+i%)^nFV/PV = RAISE TO THE 1/5th Power

(FV/PV)^.2 =

EXPECTED g =

Albegraic method:

Since: Year 5 Sales = Year 0 Sales*(1+g)^5

==>g =[ (Year 5 Sales)/(Year 0 Sales)]^(1/5)-1

g = 28.50%

Growth rate: Infosys Technologies, Inc., an Indian technology company,

5.27.sales to be at $476,450 in three years, what is the rate at which the company’s sales are expected to grow?

2008 Sales = $ 353,866 PV 2011 Sales= $476,450 FV

Number of years= 3 n FV=PV(FVIF)FV/PV= 1.3464 = (1+i%)^3cube root of 1.3464 = Growth rate =

Growth rates: Xenix Corp had sales of $353,866 in 2011. If management expects its

5.20. of $2,500 made today for the following rates and periods:

a. 6.25 percent compounded semiannually for 12 yearsb. 7.63 percent compounded quarterly for 6 yearsc. 8.9 percent compounded monthly for 10 yearsd. 10 percent compounded daily for 3 yearse. 8 percent compounded continuously for 2 years

Adjusted DataPresent value of investment = $2,500 PV

a. interest rate = 6.25% i% frequency of compounding= 2 times per year m term = 12 years n

FV=PV(FVIF)Future value of investment = FV

b. interest rate = 7.63% i% frequency of compounding= 4 times per year mterm = 6 years n


c. interest rate = 8.90% i% frequency of compounding= 12 times per year mterm = 10 years n


d. interest rate = 10.00% i% frequency of compounding= 365 times per year mterm = 3 years n


e. interest rate = 8.00% i% frequency of compounding= 1000000 times per year m term = 2 years n


Multiple compounding periods: Find the future value of an investment

5.19.craze and start your own Web site. You know that you have 450 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 27 percent in the first two years, 22 percent in year 3, and 18 percent in year 4. How many members do you expect to have at the end of four years?

# of members in Year 0= 450Growth rate in Years 1-2 27%Growth rate in Year 3 22%Growth rate in Year 4 18%

PV n 0 1 2 3 4 g 0.00% 27.00% 27.00% 22.00% 18.00%FV members

YEAR 0 1 2 3 4

Growth rate: You decide to take advantage of the current online dating

5.18.and the analysts are predicting a good year for the start-up, with sales growing 20 percent a year for the next three years. After that, the sales should grow 11 percent per year for two years, at which time the owners are planning to sell the company. What are the projected sales for the last year of the company’s operation?

Sales in Year 0 $700,000 Growth rate in years 1-3 20%Growth rate in years 4 and 5 11%

PV n 0 1 2 3 4 5g 0.00% 20.00% 20.00% 20.00% 11.00% 11.00%FV

Growth rate: CelebNav, Inc., had sales last year of $700,000,

5.17.The publishing company expects the sales to grow at a rate of 20 percent for the next three years, and by 10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in years 3 and 4. Draw a time line to show the sales level for each of the next four years.

Sales in Year 0 53,250Growth rate in year 0 0%Growth rate in years 1-3 20%Growth rate in year 4 10%

PV n 0 1 2 3 4g 0% 20.00% 20.00% 20.00% 10.00%FV

Growth rate: Your finance textbook sold 53,250 copies in its first year.

5.16. 9 percent interest annually. How long will it take to double your money?

Present value of investment = $ 150 Rate of interest = 9%Future value of investment = $ 300

PVi%FV

n

FV=PV(1.09)^n

300 = 150(1.09)^n

2.00 = (1.09)^n

1.09^8 = 1.99 or 2.0

n = 8

Number of periods: You invest $150 in a mutual fund today that pays

5.15.who has offered to lend you some money. You decide to borrow $1,300 and agree to pay back $1,500 in two years. Alternatively, you could borrow from your bank that is charging 6.5 percent interest annually. Should you go with your uncle or the bank?

Amount borrowed from uncle= $ 1,300 Period of loan = 2Amount paid back to uncle = $ 1,500 Rate of interest of bank loan = 6.50%

PV

n

FV

i%

FV=PV(1+i%)^n

1,500 = 1,300(1+i%)^2

Divide FV by PV

Revised FV model (FV/PV) = (1+i%)^2

Square root of FV/PV

Square root of FV/PV - 1.0 Decision to Borrow from Bank

Interest rate: You are in a desperate need of cash and turn to your uncle,

5.14. end of 12 years. If the annual interest rate is 7 percent, how much will she have to invest today to achieve her goal?

Amount of money to be accumulated= $ 12,000 Term of investment = 12Rate of interest = 7.00%

FV

n i%

PV=FV(PVIF)PV

Present value: Elizabeth Sweeney wants to accumulate $12,000 by the

5.13.of $1,000 at the end of seven years. The bonds are said to pay 4.5 percent interest annually. How much should you pay for them today?

Future value of bonds = $ 1,000 Maturity of bonds = 7Rate of interest = 4.50%

FV

n i%

PV=FV(PVIF)

PV

Present value: You want to buy some bonds that have a value

5.12.She plans to put 20 percent down at that time, and she believes that she will need $35,000for the downpayment. If Tracy can invest in a fund that pays 9.25 percent annually, how much will she need to invest today?

Amount needed for down payment = $35,000.00 Number of years until home purchase= 5Rate of return on fund investment = 9.25%

FV

n

i%

PV=FV(PVIF)

PV

Present value: Tracy Chapman is saving to buy a house in five years.

5.11.to pay back $7,750 at the end of three years. If you normally invest to earn 6 percent per year, how much will you be willing to lend to your brother?

Expected rate of return = 6.00%Term of loan = 3 yearsFuture payment to be received = $ 7,750

i%

n

FV

PV=FV(PVIF)

PV =

Present value: You brother has asked you for a loan and has promised

5.10. $750 two years from now. If she can earn 6.5 percent compounded annually on her investment, what should she pay for this investment today?

Opportunity cost 6.50%Term = 2 yearsFuture payment to be received $ 750

i%

n

FV

PV=FV(PVIF)

PV =

Present value: Maria Addai has been offered a future payment of

5.9. How much will he have to invest today such that the investment will be worth $25,000 in six years?

Rate of return= 7.60%Term = 6 yearsTerminal value = $ 25,000

i%

n

FV

PV=FV(PVIF)PV =

Present value: Roy Gross is considering an investment that pays 7.6 percent.

5.8.expected to hit 15 home runs in 2012. If his home-run-hitting ability is expected to grow by12 percent every year for the following five years, how many home runs is he expected to hit in 2017?

Number of home runs expected in 2007= 15Growth rate in hitting home runs = 12%Number of years of growth = 5

PV

g

n

FV=PV(FVIF)

FV =

Home runs

Growth rates: Joe Maur, a catcher for the Minnesota Twins is

5.7.made today for five years and paying 8.75 percent for the following compounding periods:

a. Quarterlyb. Monthlyc. Dailyd. Continuous

Investment = $ 100,000 Interest rate= 8.75%Term = 5Compound Period m

Quarterly Compounding Monthly Compounding Daily Copounding Continuous Compounding

a b c d

PV

i%

n

m

FV=PV(FVIF) FV=PV(FVIF) FV=PV(FVIF) FV=PV(FVIF)

Multiple compounding periods: Find the future value of an investment of $100,000

5.6.your parents promised to give you $1,000 in cash. Since you have a part-time job and, thus, don’t need the cash immediately, you decide to invest the money in a bank CD that pays 5.2 percent quarterly for the next two years. How much money can you expect to gain in this period of time?

Amount received as a gift= $ 1,000 Interest rate (per year)= 5.20%Frequency of compounding per year = 4Term of investment (years)= 2

Annually Quarterly

Compounded Compounded

PV

i%

n

m

FV=PV(FVIF)

FV =

Future value: Your birthday is coming up and instead of any presents,

5.5.savings account. You don’t expect the current balance of $2,700 to change over the next four years. How much money can you expect to have at the end of this period?

Rate of interest = 5.00%Current balance= $ 2,700 Term (years)= 4Frequency of compounding (per y 2

Annually Semi-annually


i%

PV

n

m

FV=PV(FVIF)

FV =

Future value: Your bank pays 5 percent interest semiannually on your

5.4.is planning on investing in a mutual fund that earns 8.5 percent each year. How much money can she collect in three years?

Graduation gift = $ 2,000 Rate of return per year = 8.50%Period of investment = 3 years

PV

i%

n

FV=PV(FVIF)

FV =

Future value: Kate Eden received a graduation present of $2,000 that she

5.2.annual interest. How much will the CD be worth at the end of five years?

Present value of investment $7,500 Rate of return per year 6.00%Term (years) 5Compounding per year 1

PV

i%

n

m

FV=PV(FVIF)

FV =

Future value: Ted Rogers is investing $7,500 in a bank CD that pays a 6 percent

5.3. 7.5 percent interest semiannually. If she has $5,000 to invest, how much will she have at the end of four years?

Present value of investment $5,000 Interest rate per year 7.50%Term (years) 4Compounding frequency 2

Annually Semiannually


PV

i%

n

m

FV=PV(FVIF)

FV =

Future value: Your aunt is planning to invest in a bank deposit that will pay

#5.26 Time to Grow: You have just inherited $550,000. You plan to save this money and continue tolive off the money that you are earning in your current job. If the $550,000 is everything that youhave other than an old car and some beat-up furniture, and you can invest the money in a bondthat pays 4.6 percent interest annually, how long will it be before you are a millionaire?

PV giveni% givenFV given

n = ? Trial&Error

PV FVIF FV FV

Time to Grow: You have just inherited $550,000. You plan to save this money and continue tolive off the money that you are earning in your current job. If the $550,000 is everything that youhave other than an old car and some beat-up furniture, and you can invest the money in a bondthat pays 4.6 percent interest annually, how long will it be before you are a millionaire?

Prove this FV to find n

#5.30 Refer to problem 5.29. Congress and the president have decided to increase the Federal tax rate in aneffort to reduce the budget deficit. Suppose that Caroline Weslin will pay 35 percent of her bonusto the Federal government for taxes if she accepts the bonus today and 40 percent if she receivesher bonus in two years. Will the increase in tax rates affect her decision?

Refer to problem #5.29Her bonus today is $1,820 todayShe will pay 35.00% in taxes if she accepts the bonus todayShe will pay $637.00 in taxes.

Net cash flow today is $1,183.00 PV of left over amount.

Assume she receives her bonus of $2,100.00Year Bonus CF PVIF PV

012 $2,100

40.00%

Yes, it make a difference if the tax rate increases. Note the differences in the two present values.Accepting the bonus today and paying the current tax rate is the most advantangeous decision.

Refer to problem 5.29. Congress and the president have decided to increase the Federal tax rate in aneffort to reduce the budget deficit. Suppose that Caroline Weslin will pay 35 percent of her bonusto the Federal government for taxes if she accepts the bonus today and 40 percent if she receivesher bonus in two years. Will the increase in tax rates affect her decision?

in taxes if she accepts the bonus today

PV of left over amount.

two years fr today and a discount rate o 6.00%

She will pay in taxes if she accepts bonus 2 years from now.She will pay this in taxes

PV of left over amount

Yes, it make a difference if the tax rate increases. Note the differences in the two present values.Accepting the bonus today and paying the current tax rate is the most advantangeous decision.

5.1.fund that will provide a return of 8 percent each year. What will be the value of the investment in ten years?

Present value of investment $25,000 Rate of return per year 8.00%Term (years) 10Compounding per year 1

PV

i%

n

m

FV=PV(FVIF)

FV =

Future value: Chuck Tomkovick is planning to invest $25,000 today in a mutual

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