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**Unformatted text preview: **PV=10,000 PMT=300 PV of ordinary annuity= ° ± 1 − 1 ( 1+± ) ² ³ 10000=(300/0.015)*{1-[1/(1.015^n)]} 0.5 = 1 – [1/(1.015^n)] 1/(1.015^n)=1-0.5=0.5 2 = 1.015^n ln(2)=n*ln(1.015) n=ln2/ln1.015 n=46.56 months; 46.56/12=3.88 years 8) Hint: Two single lump sums; I = 10%=0.1 PV (at t=3)of both payments = PV (at t=3) of 4 th year’s cash flow + PV (at t=3) of 5 th year’s cash flow. Since we are finding the PV in the third year, we can discount the $10,000 back one year and the $110,000 back two years. PV=10,000/[(1+0.1)^1] + 110,000/[(1+0.1)^2]=$100,000 9) N=37*12=444 I=9%/12=0.75%=0.0075 PMT=1000 FV= ´ ± {(1 + µ ) ¶ − 1} = FV of ordinary annuity since stated as end-of-mth payment FV=(1000/0.00750) {[(1+0.O075)^444]-1} FV= 3,545,779.215 10) EAR= 1 + °±² ³ ´ ³ − 1 1. EAR=(1+0.09/52)^52-1=9.4089% 2. 9.2%; EAR = APR, since m=1; everything is annual Loan rate #2 is the better offer. (we want to borrow at the lowest rate!) 11) FV=2M I=5%/12=0.4167%=0.004167 N=40*12=480 FV= µ ¶ {(1 + · ) ¸ − 1}(1+i) = FV of annuity due, since the payments are at the begin. of period 2,000,000=(C/0.004167){[(1.004167)^480]-1}(1.004167) C= 1305.02...

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- Fall '14
- Garrett
- Payment, Calculation, Credit card, payments