FAR 5 Present value

Question 1

Present value of $1

Answer 1

The amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future

Question 2

Future value of $1

Answer 2

• compound interest

- the amount that would be accumulated at a future point in time if $1 were invested now

Question 3

Present value of an ordinary annuity

Answer 3

• payment at the end of the year

- current worth of a series of identical periodic payments to be made in the future

Question 4

Future value of an ordinary annuity

Answer 4

• payment at the end of the year
• the sum to be received at some point in the future of identical periodic investments made from the present until that point in the future

Question 5

Present value of an annuity due

Answer 5

• payment at the beginning of the year

- current worth of a series of identical periodic payments to be made in the future

Question 6

Future value of an annuity due

Answer 6

• payment at the beginning of the year
• the sum to be received at some point in the future of identical periodic investments made from the present until that point in the future