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Highest Present Value Analysis

The document presents three options with different rates, present values, and future values over 10 years. For the first question, option C has the highest present value of $13,511.28 and is supported by financial theory. For the second question, option B has the highest present value of $11,237.73 and is supported. For the third question, option A has the highest present value of $10,166.99 and is supported.

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Abhishek Surana
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2 views5 pages

Highest Present Value Analysis

The document presents three options with different rates, present values, and future values over 10 years. For the first question, option C has the highest present value of $13,511.28 and is supported by financial theory. For the second question, option B has the highest present value of $11,237.73 and is supported. For the third question, option A has the highest present value of $10,166.99 and is supported.

Uploaded by

Abhishek Surana
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Question 1

RATE
Option A
PV

4%
$10,000

Option B
NPER
PMT
PV

10 years
$1,600
$12,977.43

Option C
FV
PV

$20,000.00
$13,511.28

HIGHEST PRESENT VALUE

Financial theory supports choosing Option C


Question 2

RATE
Option A
PV

7%
$10,000

Option B
NPER
PMT
PV

10 years
$1,600
$11,237.73

Option C
FV
PV

$20,000.00
$10,166.99

HIGHEST PRESENT VALUE

Financial theory supports choosing Option B


Question 3

RATE
Option A
PV

10%
$10,000

Option B
NPER
PMT
PV

10 years
$1,600
$9,831.31

Option C
FV
PV

$20,000.00
$7,710.87

HIGHEST PRESENT VALUE

Financial theory supports choosing Option A

IGHEST PRESENT VALUE

sing Option C

IGHEST PRESENT VALUE

sing Option B

IGHEST PRESENT VALUE

sing Option A

Answer a:

Future value on doing nothing for the next 10 years, then puts $2400
PMT
$2,400
NPER
35
RATE
8%
FV (1)
$413,560.33

Answer b:

Future value if they put $2400 per year away for the next 10 years, th
PMT
$2,400
NPER
10
RATE
8%
FV at 10th years
$34,767.75
FV at after 45 years (2) $514,053.15

Answer c:

Future value if they put $2400 per year away for each of the next 45
FV = FV(1)+FV(2)

Answer d:

FV
NPER
RATE
PMT

$927,613.48
$925,000
20
8%
$18,716.01

If Tom and Tricia wait 25 years (after the kids are raised!) before they
each year for 20 years in order to have $925,000 saved up on the firs

10 years, then puts $2400 per year away for the remaining 35 years

$413,560.33

ay for the next 10 years, then puts nothing additional away for the remaining 35 years

ay for each of the next 45 years

$927,613.48

s are raised!) before they put anything away for retirement, they should put $ 18,716
5,000 saved up on the first day of their retirement 45 years from today

$514,053.15

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