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# HCA 270 WEEK 3 CheckPoint Present and Future Value fin571

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## About this Document

HCA 270 WEEK 3 CheckPoint Present and Future Value
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This 0 page Study Guide was uploaded by an elite notetaker on Tuesday November 10, 2015. The Study Guide belongs to fin571 at Kaplan University taught by in Fall 2015. Since its upload, it has received 24 views.

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Date Created: 11/10/15
Present and Future Value Calculate the future value of the following 5000 compounded annually at 6 for 5 years 5000 16quot5 5000 106quot5 669113 5000 compounded semiannually at 6 for 5 years 5000 162quot5X2 5000 103quot10 671958 5 000 compounded quarterly at 6 for 5 years 5000 164quot5X4 5000 1015quot20 676525 5 000 compounded annually at 6 for 6 years 5000 16quot6 5000 106quot6 709260 Answer the following What conclusions can be drawn about the frequency of compounding interest What conclusions can be drawn about the length of time an amount is compounding The future value increases with the frequency of compounding for the same amount and the same length of time The future value decreases with the length of time an amount is compounded Calculate the present value of the following 7000 in 5 years at an annual discount rate of 6 7000 16quot5 7000 l06quot5 523081 7000 in 5 years at a semiannual discount rate of 6 7000 162quot5X2 7000 103quot10 520866 7000 in 5 years at a quarterly discount rate of 6 7000 164quot5X4 7000 1015quot20 522375 7000 in 6 years at an annual discount rate of 6 7000 16quot6 7000 106quot6 493472 Answer the following What conclusions can be drawn about the frequency of the discounting interval What conclusions can be drawn about the length of time until the receipt of that value The present value decreases with the frequency of the discounting interval for the same amount and the same length of time The present value decreases with the length of time until the receipt of that value Answer the following Assume you have a choice between two annuity contracts Contract A pays 5000 per year for 5 years starting one year from today Contract B pays 5000 per year for 5 years starting today The discount rate for each is 6 Which annuity contract would you choose for your retirement Why I would choose contract B because the present value of contract B is 106 times the present value of contract A This can be seen by realizing that the cash ows for both contracts are same but each cash ow in contract A is discounted by 106 compared those for contract B

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