.494px;=”” block;=””>Future Value and Present Value
Unit 5 focuses on the future value and present value of compounding interest, which is covered
in your reading of Chapter 13: “Compound Interest, Future Value, and Present Value.”
You must show your work at all times. The steps for solving each problem must be explained.
Failure to do so could result in your submission being given a 0 grade. If you have any
questions about how much work to show, please contact your instructor.
Assignments must be submitted as a Microsoft® Word® document and uploaded to the
Dropbox for Unit 5. Type all answers directly in this Assignment below each question.
All Assignments are due by Tuesday at 11:59 p.m. ET of the assigned unit.
Available Resources
One of the benefits of attending here at Kaplan is that we have a tremendous amount of
resources available for you. If you find yourself having difficulties completing this exercise
consider taking advantage on one or more of the following resources:
1. Textbook: The textbook reading assigned for each unit includes the topics and calculation
details for each type of problems you will complete.
2. LiveBinders: In the LiveBinder for the unit, you will find more information on unit topics,
example problems, and video content on the unit’s topics. To access the LiveBinder for a unit,
use the menu on the left side of the classroom, select the unit you are in, and when you click the
unit link several additional links will appear below the unit heading, one of those links will be
“Live Binders.”
3.
a.
b.
c.
d. KU Math Center: Take advantage of the KU Math Center’s many services:
Math Tutoring
Question & Answer Services
Request a Video Example Services
Project Review Services (be sure to submit Assignments early enough to receive feedback and
make corrections before the Assignment due date, 24 hour turn-around times Monday-Thursday
and 48 hour turn-around times on weekends are typical).
e. Math Center Reference Library
To access the KU Math Center start at the KU Campus Home Page. From the KU
Campus Home Page, select My Studies (top menu bar), then select Academic Support
Center, and review the Math Center offerings. MM255 Business Math and Statistical Measures
4. Email Your Instructor: Your instructor is only an email away; when you cannot make any more
progress on a problem, reach out. Send your instructor the work you started and steps of the
problem you have completed so far, and ask for help. Your instructor will respond within 24
hours.
Future Value and Present Value Assignment (Total 40 Points)
Question 1: (10 Points)
Calculate the future value of an investment of $2300, after 7 months, earning 6.6% APR,
compounded monthly, by compounding manually.
Reminder: Be sure to show your work, and to calculate the period interest before solving.
Question 2: (10 Points)
Find the future value of a $195,000 Certificate of Deposit that pays compounded interest every
three months at the rate of 8% per year. The CD has a term of 7 years.
a) Calculate the FV (Future Value) using the “Future Value or Compound Amount of $1.00” table in
your textbook.
Reminder: To use Table 13-1, you need to calculate the Number of Periods and the
Interest Rate per Period.
b) Calculate the FV (Future Value) using the formula: FV = P(1 + R)N
Reminder: Always show work. You can do this by stating the values that you are
substituting into the formula.
c) How much interest was earned on the investment?
Use either the result from Part 2a or Part 2b, since they are slightly different for your
calculation. Question 3: (10 Points)
You inherit $315,000 and decide to invest it for 55 days compounded daily at 6% annual
interest. After the 55 days, you are going to invest your new found money in a startup business.
a) How much interest is earned on this investment?
You can either use the Future Value formula or Table 13-2
Future Value Formula MM255 Business Math and Statistical Measures
FV = P(1 + R)N
Reminder: R = Interest Rate per period (day) Table 13-2: Compound Interest on $100, Compounded Daily (365 days) (Exact Time,
Exact Interest Basis)
Reminder – The Table is for compound interest on each $100. b) How much money will you have to invest in the startup after the 28 days? Question 4: (10 Points)
How much money must be invested into an account paying 4% annually, compounded annually,
to have $635,000 in 29 years when I retire?
a) Calculate the PV (Present Value) using the “Present Value of $1.00” table in your textbook.
Remember: To use Table 13-3, you need the Number of Periods and the Interest Rate
per Period.
b) Calculate the PV (Present Value) using the formula: PV = FV / (1 +R)N
Reminder: Always show work. You can do this by stating the values that you are
substituting into the formula.
c) How much interest did you earn over the life of the investment?
You can use either the result from Part 4a or Part 4b for your calculations, since they are
slightly different. Show your work.
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