Determine the future value of this annuity due problem if your first $100 is invested now.

P1.  Find the future value one year from now of a $7,000
investment at a 3 percent annual compound interest rate.  Also
calculate the future value if the investment is made for two
years.

P2.  Find the future value of $10,000 invested now after
five years if the annual interest rate is 8 percent.

What would be the future value if the interest rate is a simple
interest rate?
What would be the future value if the interest rate is a
compound interest rate?

P3.  Determine the future values if $5,000 is invested in
each of the following situations:

5 percent for ten years.
7 percent for seven years.
9 percent for four years.

P4.  You are planning to invest $2,500 today for three
years at a nominal interest rate of 9 percent with annual
compounding.

What would be the future value of your investment?
Now assume that inflation is expected to be 3 percent per year
over the same three-year period.  What would be the
investment’s future value in terms of purchasing power?
What would be the investment’s future value in terms of
purchasing power if inflation occurs at a 9 percent annual
rate?

Learning Extension Chapter 9

1. Assume you are planning to invest $100 each year for
four years and will earn 10 percent per year. Determine the future
value of this annuity due problem if your first $100 is invested
now.

2. Assume you are planning to invest $5,000 each year for six
years and will earn 10 percent per year. Determine the future value
of this annuity due problem if your first $5,000 is invested
now.

3. What is the percent value of a five year lease arrangement
with an interest rate of 9 percent that requires annual payments of
$10,000 per year with the first payment being due now?

4. Use financial calculator to solve for the interest rate
involved in the following future value of an annuity due problem.
The future value is $57,000, the annual payment is $7,500, and the
time period is six years.