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Time Value Of Money Present Value and Compounding Questions Worksheet

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NOTE 4: TIME VALUE OF MONEY (PART 1)   Future Value and Compounding Present Value and Discounting I. Future Value for a Lump Sum FVt = PV x (1 + r)t 1. $110 = $100 x (1 + .10) 2. $121 = $110 x (1 + .10) = $100 x 1.10 x 1.10 = $100 x 1.102 = $121 x (1 + .10) = $100 x 1.10 x 1.10 x 1.10 = $100 x (1.10)3 3. $133.10 Year Beginning Amount Interest Earned Ending Amount 1 $100.00 $10.00 $110.00 2 110.00 11.00 121.00 3 121.00 12.10 133.10 4 133.10 13.31 146.41 5 146.41 14.64 161.05 Total interest $61.05  The future value, FVt, of $100 invested today at r% for t periods is FVt = $100 x (1 + r)t  The expression (1 + r)t is the future value interest factor. Example 1: Deposit $5,000 today in an account paying 12%. (a.) How much will you have in 6 years? (b.) How much is simple interest? (c.) How much is compound interest? 1 II. P ...
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