Answer to Question #116797 in Economics of Enterprise for dina

Question

Bank will give you after 5-years $1000, 000 with considering 12%-interest. For
this situation evaluate the present, annual, & future values at simple & compound
interest rates.

Answer 1

FV simple & compound:$1000, 000

PV  simple:

$FV=PV\times(1+i\times n)$

$1 000 000=PV\times(1+0.12\times 5)$

PV=625 000

PV compound:

$FV=PV\times(1+i)^n$

$1 000 000=PV\times(1+0.12)^5$

PV=567 426.86

annual

$FV=625 000\times(1+0.12\times1)=700 000$

$FV=567 426.86\times(1+0.12)^1=635518.08$