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HW Solutions (Chapter 5)

# HW Solutions (Chapter 5) - n 1 5-32A(a FVn = PMT t 0 15 1(1...

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5-32A. (a) FV n = PMT + - = t 1 n 0 t i) (1 \$50,000 = PMT + - = t 1 15 0 t .07) (1 \$50,000 = PMT (FVIFA 7%, 15 yr. ) \$50,000 = PMT(25.129) PMT = \$1,989.73. per year (b) PV = FV n PV = \$50,000 (PVIF 7%, 15 yr. ) PV = \$50,000(.362) PV = \$18,100 deposited today (c) The contribution of the \$10,000 deposit toward the \$50,000 goal is FV n = PV(1 + i) n FV n = \$10,000 (FVIF 7%, 10 yr. ) FV 10 = \$10,000(1.967) = \$19,670 Thus only \$30,330 need be accumulated by annual deposit. FV n = PMT + - = t 1 n 0 t i) (1 \$30,330 = PMT (FVIFA 7%, 15 yr. ) \$30,330 = PMT [25.129] PMT = \$1,206.97 per year 5-33A. (a) This problem can be subdivided into (1) the compound value of the \$100,000 in the savings account (2) the compound value of the \$300,000 in stocks, (3) the additional savings due to depositing \$10,000 per year in the savings account for 10 years, and (4) the additional savings due to depositing \$10,000 per year in the savings account at the end of years 6- 10. (Note the \$20,000 deposited in years 6-10 is covered in parts (3) and (4).) (1) Future value of \$100,000 FV 10 = \$100,000 (1 + .07) 10 FV 10 = \$100,000 (1.967)

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FV 10 = \$196,700 (2) Future value of \$300,000 FV 10 = \$300,000 (1 + .12) 10 FV 10 = \$300,000 (3.106) FV 10 = \$931,800 (3) Compound annuity of \$10,000, 10 years FV 10 = PMT
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HW Solutions (Chapter 5) - n 1 5-32A(a FVn = PMT t 0 15 1(1...

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