Future value and present value of an annuity

1. How are the future value of an amount of $1 and the present value of an amount of $1 similar?

2. What are the characteristics of an annuity?

3. What is the difference between the future value and present value of an annuity?

4. Describe the four-step process for solving time value of money problems.

How much will an investment of $10,000 be worth at the end of five years if it earns:

A. 10 percent interest compounded annually?

B. 10 percent interest compounded semiannually?

C. 10 percent interest compounded quarterly?

D. Why do the answers above change?

What is the present value of $10,000 five years from today if interest is:

A. 10 percent compounded annually?

B. 10 percent compounded semiannually?

C. 10 percent compounded quarterly?

D. Why do the answers above change?

Solution: