[nav3]

I have a few questions that seem easy but I want to make sure I know what I'm doing

1) If you invest 40000 today and 8%, how much would you have at the end of 5 years, if compounded semi-annually?

2) If you invest 5000 per year for 8 years earning 8% per year how much would you have at the end of 8 years?

3) If you are offerd 50000 in 3 years and you require 4% on similar investments, what would you be willing to pay today if semiannual?

4) If you are offered 12000 per year for 5 years and you require 9%, how much would you be willing to pay today?

[terryg752]

I am not sure but I think it will be like this:

1. 40000 times (1+.04)^10

2. 5000 (1+.08)^8 + 5000 (1+.08)^7 + 5000 (1+.08)^6... 8 terms

= 5000 (1.08^8 + 1.08^7 +... )

= 5000 (1.08^8 - 1) / (1.08 -1)

3. 100 becomes in 3 years = 100(1.04)^6

If 100(1.04)^6, Pay now = 100

If 1, Pay now = 1/1.04^6

If 50000, Pay now = 50000/1.04^6


Similarly for other questions