MM/255 MM255 MM 255 Unit 5 Assignment

 MM 255 Unit 5 Assignment

Unit 5: Instructor Graded Assignment - Version 5

Future Value and Present Value

Unit 5 focuses on the future value and present value of compounding interest, which is covered in your reading of Chapter 13: “Compound Interest, Future Value, and Present Value.”

You must show your work at all times. The steps for solving each problem must be explained. Failure to do so could result in your submission being given a 0 grade. If you have any questions about how much work to show, please contact your instructor.

Assignments must be submitted as a Microsoft® Word® document and uploaded to the Dropbox for Unit 5. Type all answers directly in this Assignment below each question.

All Assignments are due by Tuesday at 11:59 p.m. ET of the assigned unit.

Available Resources

One of the benefits of attending here at Kaplan is that we have a tremendous amount of resources available for you. If you find yourself having difficulties completing this exercise consider taking advantage on one or more of the following resources:

1.    Textbook: The textbook reading assigned for each unit includes the topics and calculation details for each type of problems you will complete.

2.    LiveBinders: In the LiveBinder for the unit, you will find more informationon unit topics, example problems, and video content on the unit’s topics. To access the LiveBinder for a unit, use the menu on the left side of the classroom, select the unit you are in, and when you click the unit link several additional links will appear below the unit heading, one of those links will be “Live Binders.”

3.    KU Math Center: Take advantage of the KU Math Center’s many services:

a.    Math Tutoring

b.    Question & Answer Services

c.    Request a Video Example Services

d.    Project Review Services (be sure to submit Assignments early enough to receive feedback and make corrections before the Assignment due date, 24 hour turn-around times Monday-Thursday and 48 hour turn-around times on weekends are typical).

e.    Math Center Reference Library

To access the KU Math Center start at the KU Campus Home Page. From the KU Campus Home Page, select My Studies (top menu bar), then select Academic Support Center, and review the Math Center offerings.

4.    Email Your Instructor: Your instructor is only an email away; when you cannot make any more progress on a problem, reach out. Send your instructor the work you started and steps of the problem you have completed so far, and ask for help. Your instructor will respond within 24 hours.

Future Value and Present Value Assignment (Total 40 Points)

Question 1: (10 Points)

Calculate the future value of an investment of $2,500, after 6 months, earning 5% APR, compounded monthly, by compounding manually.

Reminder: Be sure to show your work, and to calculate the period interest before solving.

Question 2: (10 Points)

Find the future value of a $160,000 Certificate of Deposit that pays compounded interest every six months at the rate of 5% per year. The CD has a term of 5 years.

a)    Calculate the FV (Future Value) using the “Future Value or Compound Amount of $1.00” table in your textbook.
Reminder:To use Table 13-1, you need to calculate the Number of Periods and the Interest Rate per Period.

b)    Calculate the FV (Future Value) using the formula: FV = P(1 + R)^N
Reminder: Always show work. You can do this by stating the values that you are substituting into the formula.

c)    How much interest was earned on the investment?
Use either the result from Part 2a or Part 2b, since they are slightly different for your calculation.

Question 3: (10 Points)

You inherit $260,000 and decide to invest it for 28 days compounded daily at 7.5% annual interest. After the 28 days, you are going to invest your new found money in a startup business.

a)    How much interest is earned on this investment?
You can either use the Future Value formula or Table 13-2

Future Value Formula
FV = P(1 + R)^N
Reminder: R = Interest Rate per period (day)


Table 13-2: Compound Interest on $100, Compounded Daily (365 days) (Exact Time, Exact Interest Basis)
Reminder - The Table is for compound interest on each $100.

b)    How much money will you have to invest in the startup after the 28 days?

Question 4: (10 Points)

How much money must be invested into an account paying 8% annually, compounded annually, to have $650,000 in 25 years when I retire?

a)    Calculate the PV (Present Value) using the “Present Value of $1.00” table in your textbook.
Remember: To use Table 13-3, you need the Number of Periods and the Interest Rate per Period.

b)    Calculate the PV (Present Value) using the formula: PV = FV / (1 +R)^N
Reminder: Always show work. You can do this by stating the values that you are substituting into the formula.

c)    How much interest did you earn over the life of the investment?
You can use either the result from Part 4a or Part 4b for your calculations, since they are slightly different. Show your work.