Homework 3 - a $100 investment to grow to $200 at 12...

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a) $100 investment to grow to $200 at 12% interest rate =6.12 years $100 investment to grow to $200 at 6% interest rate =11.9 years
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a) Future value of single cash flow Single cash flow Interest rate deposit years $1500 7% 3 $1500 7% 6 $1500 7% 9 b) Amount of interest earned Years Amount invested Amount received 0 to 3 $1500 $1837.56 3 to 6 $1837.56 $2251.1 6 to 9 $2251.10 $2757.69 c) Since the earned interest every year is added towards the starting capital of the f
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Future value $1837.56 $2251.10 $2757.69 Interest earned $337.56 $413.54 $506.59 folllowing year, interest increases yearly.
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a) PV = $6000 / (1+0.12)^6 =$3,039.78 b) PV = $6000 / (1+0.12)^6 =$3,039.78 c) PV = $6000 / (1+0.12)^6 =$3,039.78 d) All three scenarios use the same numbers and hence can be used for the exact sa
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ame calculation .
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a) PV = $500 / (1+0.07)^3 =$408.16 b) The present value of $500 receivable after 3 years if annually compounded is $40
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Unformatted text preview: c) If Jim can purchase the investment for less than $408.16, he should make the inv 08.16 vestment. a) PV30 = ($20,000 / 0.11) x (1-1/(1+0.11)^30) =$173,875.85 b) PV= $173,875.85 / (1+0.09)^20 =$31,024.82 c) An increase in interest during and prior to reTrement will cause a reducTon of va d) PV30 = ($20,000 / 0.1) x (1-1/(1+0.1)^30) =$188,538.28 alue of the investments calculated. a) Present value of mixed stream Interest rate per year 12% 1 2 3 4 5 Present Value Cash fow ($2000) $3000 $4000 $6000 $8000 $11,805.51 a) FV = $5,000 x (1+0.12)^5 =$8811,70 b) FV = $5,000 x (1+0.16)^6 =$12191,98 c) FV = $5,000 x (1+0.2)^10 =$30958,68 a) CF = $220,000 / ((1+0.08)^42-1)/0.08) =$723,10 b) FV = $600/ ((1+0.08)^42-1)/0.08) =$182,546.11...
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