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Individual Assignment 3

1) The document contains calculations of accumulated values, interest earned, future values, and present values for various investments over periods of 3, 6, 9, and 10 years with interest rates ranging from 6% to 20%. 2) Higher interest rates result in lower present values, while longer periods before receiving a lump sum payment also reduce present value. 3) For annuity calculations, ordinary annuities have higher future and present values than annuities due at lower interest rates, but the opposite is true at higher interest rates due to the effect of compound interest.

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Mutiara Nuvi Nafisah
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77 views2 pages

Individual Assignment 3

1) The document contains calculations of accumulated values, interest earned, future values, and present values for various investments over periods of 3, 6, 9, and 10 years with interest rates ranging from 6% to 20%. 2) Higher interest rates result in lower present values, while longer periods before receiving a lump sum payment also reduce present value. 3) For annuity calculations, ordinary annuities have higher future and present values than annuities due at lower interest rates, but the opposite is true at higher interest rates due to the effect of compound interest.

Uploaded by

Mutiara Nuvi Nafisah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Muhammad Elfan Budi Nugroho 29118399 YP60A

Individual Assignment 3
P5-5
A. Find accumulated at the end of 3 years, 6 years, and 9 years.
Accumulated 3 years $ 1.837,6
Accumulated 6 years $ 2.251,1
Accumulated 9 years $ 2.757,7

B. Calculate the amount of interest earned in the first three years, second three years, and
third three years.
Interest First 3 years $ 337,6
Interest Second 3 years $ 413,5
interest Third 3 years $ 506,6

C. Interest earned increases in each succeeding in 3-year period, because each year has
amount value of principal + interest. From first amount of value, will be principal
calculation interest for second years. Also, it will be continuing the following year. That
called interest on interest.
P5-15
A. The following rates of return on similar-risk investments during the 10-year period.
6% $ 558.394,78
9% $ 422.410,81
12% $ 321.973,24

B. Assumption that the $1.000.000 will be received in 15 years.


6% $ 417.265,06
9% $ 274.538,04
12% $ 182.696,26

C. We know from A that higher interest rate will be resulting lower present value.
Compared with B, more period will have lower present value. As a receiver the lottery,
we want to get paid in early time in low interest because $1.000.000 will have higher
present value.
P5-21
A. Future Value of both annuities at the end of year 10 in 10% and 20% interest.
Future Value Company C Company D
10% $ 39.843,56 $ 38.568,57
20% $ 64.896,71 $ 68.530,92
B. In 10%, Ordinary Annuity (Company C) has greater future value than Annuities Due
(Company D). In 20%, Annuities Due (Company D) has greater future value than
Ordinary Annuity (Company C).
C. Present Value of both annuities, in 10% and 20% interest.
Present Value Company C Company D
10% $ -15.361,42 $ -14.869,85
20% $ -10.481,18 $ -11.068,13
D. In 10%, Ordinary Annuity (Company C) has greater present value than Annuities Due
(Company D). In 20%, Annuities Due (Company D) has greater present value than
Ordinary Annuity (Company C).
E. For Future Value in 10% interest, Company C has bigger than Company D because
Company C required higher annual payment. But in 20%, even though Company D has
fewer annual payment, it has bigger future value than Company C because Company D
use annuities due term.
For Present Value in 10% interest, Company C has bigger value than Company D. In
20%, Company D has bigger value than Company C. From table below, we find
Company D in 20% interest get highest return.

Return Company C Company D


10% 24.482,14 23.698,72
20% 54.481,18 57.462,79

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