Future value and present value are two key business tools. Required: Ignoring income taxes, answer the following independent questions: A. Your best friend won the state lottery and has offered to give you $15,000 at the end of eight years (after he has made his first million). You figure that if you had the money now, you could invest it at a rate of 10% compound annually. What is the value today of your friend's future gift?B. Suppose that you invest $11,000 today in an account that bears interest at the rate of 6% compounded annually. What will your investment grow to at the end of seven years?C. Suppose that your best friend won the state lottery and promised to give you $9,000 per year for five years. The first payment will be made at the end of 20x1. Using a 12% annual compound
discount rate, what is the value of these payments at the beginning of 20x1?D. Suppose that you invest $2,000 at the end of each year for nine years in an investment that provides a return of 8% compounded annually. What will be the value of your investment at the end of nine years?
What will be an ideal response?
A. Present value: $15,000 × 0.467 = $7,005
B. Future value: $11,000 × 1.504 = $16,544
C. Present value: $9,000 × 3.605 = $32,445
D. Future value: $2,000 × 12.488 = $24,976
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