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PV Example Problems
6. Calculate the present value of $10,000 to be received in exactly 10 years, assuming an annual interest rate of 9 %. Solution on HP 12C: f clx ; g 8 ; 10,000 FV ; 9 i ; 10 n ; PV = 4,224.11
7.
Calculate the Present Value of an ordinary annuity of $5,000 received annually for 10 years, assuming a discount rate of 9 %. Solution on HP 12C: f clx ; g 8 ; 5,000 chs PMT ; 9 i ; 10 n ; PV = 32,088.29
8.
Susan expects to receive $50,000 in 2 years. Her opportunity cost is 10 % compounded monthly. What is the sum worth to Susan today? Solution on HP 12C: f clx ; g 8 ; 50,000 FV ; 2 g n ; 10 g i ; PV = 40,970.47
9.
Elaine wants to have $500,000 in todays dollars at his retirement 22 years from now. She already has accumulated a large investment portfolio and wants to know how much of it she should earmark for this goal. She believes she can earn 9% after tax and that inflation will average 3% over the period. How much must Elaine set aside to accomplish her goal? Solution on HP 12C: f clx; g 8 ; 500,000 FV, 22 n ; 1.09 ENTER 1.03 / 1 100 X i ; PV = 143,881.84
10.
Ethel wants to withdraw $3,000 at the beginning of each year for the next 5 years. She expects to earn 8 % compounded annually on her investment. What lump sum should Ethel deposit today? Solution on HP 12C: f clx ; g 7 ; 3,000 chs PMT ; 8 i ; 5 n ; PV = 12,936.38
13.
Monk borrowed $240,000 at 8 % for 15 years. What would his first payment be if it is due 30 days after the loan was made on January 30, 2007? Solution on HP 12C: f clx ; g 8 ; 240,000 PV ; 15 g n ; 8 g i ; PMT = 2,293.56
14.
Mona purchased a car for $25,000. She is financing the auto at a 10 % annual interest rate, compounded monthly for 4 years. What payment is required at the end of each month to finance Monas car? Solution on HP 12C: f clx ; g 8 ; 25,000 chs PV ; 10 g i ; 4 g n ; PMT = 634.06
15.
Josh purchased a house for $215,000 with a down payment of 20 %. If he finances the balance at 10 percent over 30 years, how much will his monthly payment be? Solution on HP 12C: First, he paid down .20 of 215,000 so he is borrowing .80 of 215,000 = 172,000. So, f clx ; g 8 ; 172,000 PV ; 10 g i ; 30 g n ; PMT = 1,509.42
FV Example Problems
16. What is the FV of $10,000 invested for 10 years, assuming an annual interest rate of 8%? Solution on HP 12C: f clx; g 8 ; 10,000 PV; 10 n ; 8 i ; FV = 21,589.25 17. What is the FV of an Ordinary annuity of $5,000 received for 10 years, assuming an earnings rate of 9%? Solution on HP 12C: f clx; g 8 ; 5,000 PMT; 10 n ; 9 i ; FV = 75,964.65 18. Marty invested $5,000 in an interest-bearing promissory note earning 8 % annual rate of interest compounded monthly. How much will the note be worth at the end of 5 years, assuming all interest is reinvested at the 8 % rate? Solution on HP 12C: f clx ; g 8 ; 5,000 chs PV; 60 n ; 8 g i ; FV = 7,449.23 19. Bob has been dollar cost averaging in a mutual fund by investing $1,000 at the beginning of every quarter for the past 5 years. He has been earning an average annual compound return of 11 % compounded quarterly on this investment. How much is the fund worth today? Solution on HP 12C: f clx ; g 7 ; 1,000 chs PMT ; 20 n ; 11 ENTER 4 / i ; FV = 26,917.83
20.
If Carlos invested $12,000 dollars for 10 years and he was getting an annual interest rate of 9.25 %, how much would his investment be worth at the end of the 10 years? Solution on HP 12C: f clx ; g 8 ; 12,000 chs PV ; 10 n ; 9.25 i ; FV = 29,066.69