Find the following values for the lump sum assuming annual compounding: the future value of $500 invested at 8 percent for one year. future value=$500 * (1+0.08) ^1future value=$540the future value of $500 invested at 8 percent for five years. future value=$500 * (1+0.08) ^5future value=$734.66the present value of $500 to be received in one year when the opportunity cost rate is 8 percent. present value=$500/(1+0.08) ^1present value =$462.96the present value of $500 to be received in five years when the opportunity cost rate is 8 percent. present value=$500/(1+0.08) ^5present value =$340.29

a) 540

b) 734.66

c) 462.96

d) 340.29

Explanation:

Here is the formula and explanation for each case:

a) FV of 500 invested at 8% during a year:

Principal500.00

time1.00

rate0.08000

Amount540.00

b) FV of 500 invested at 8% during a five years:

Principal500.00

time5.00

rate0.08000

Amount734.66

c) PV of 500 at 8% discount rate within a year

Maturity  500.00

time  1.00

rate  0.08000

PV   462.9630

d) PV of 500 at 8% discount rate in 5 years

Maturity  500.00

time  5.00

rate  0.08000

PV   340.2916

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