FIN CHAP 06 SOL _1-_8

FIN CHAP 06 SOL - CHAPTER 6 6-1 FUTURE VALUE If you deposit $10,000 in a bank account that pays 10 percent interest annually HOW MUCH MONEY WILL BE

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CHAPTER 6 6-1 FUTURE VALUE If you deposit $10,000 in a bank account that pays 10 percent interest annually, HOW MUCH MONEY WILL BE IN YOUR ACCOUNT AFTER 5 YEARS? 0 10% 1 2 3 4 5 PV = 10,000 FV 5 = ? FV 5 = $10,000(1.10) 5 = $10,000(1.61051) = $16,105.10. Alternatively, with a financial calculator enter the following: N = 5 I = 10 PV = -1000 and PMT = 0. Solve for FV = $16,105.10.
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6-2 PRESENT VALUE WHAT IS THE PRESENT VALUE OF A SECURITY THAT PROMISES TO PAY YOU $5,000 IN 20 YEARS? ASSUME THAT YOU CAN EARN 7 PERCENT IF YOU WERE TO INVEST IN OTHER SECURITIES OF EQUAL RISK. 0 7% 5 10 15 20 PV = ? FV 20 = 5,000 With a financial calculator enter the following: N = 20, I = 7, PMT = 0, and FV = 5000. Solve for PV = $1,292.10.
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TIME FOR A LUMP SUM TO DOUBLE If you deposit money today into an account that pays 6.5 percent interest, HOW LONG WILL IT TAKE FOR YOU TO DOUBLE YOUR MONEY? 0 6.5% n = ? PV = 1
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This note was uploaded on 04/15/2008 for the course FIN 321 taught by Professor Kelley during the Spring '08 term at Loyola Maryland.

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FIN CHAP 06 SOL - CHAPTER 6 6-1 FUTURE VALUE If you deposit $10,000 in a bank account that pays 10 percent interest annually HOW MUCH MONEY WILL BE

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