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Chapter 1 Solution Set

# Chapter 1 Solution Set - \$5,444.67 therefore choose 5 in...

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Chapter 1 Solution Set 1) FV = PV (1+r)^t = \$34,000(1+.05)^10 = \$55,382.42 FV = PV (1+r)^t = \$34,000(1+.05)^20 = \$90,212.12 2) a) FV = PV (1+r)^t = \$8,000(1+.06)^3 = \$9,528.13 b) PV = FV / (1+r)^t = \$3,000 / (1+.05) = \$2,857.14 c) FVA = CF[{(1+r)^t – 1} / r] = \$2,400[{(1+.06)^3 – 1} / 0.06] = \$7,640.64 d) PVA = CF[{1 – 1 / (1+r)^t}/r] = \$1,000 [{1 – 1 / (1.06)^3}/.06] = \$2,673.01 3) a) FV = PV (1+r)^t = \$400(1+.05)^2 = \$441 b) FVA = CF[{(1+r)^t – 1} / r] = \$1,200[{(1+.07)^10 – 1} / 0.07] = \$16,579.74 c) PV = FV / (1+r)^t = \$2,000 / (1+.05)^3 = \$1,727.68 d) PVA = CF[{1 – 1 / (1+r)^t}/r] = \$6,000 [{1 – 1 / (1.06)^10}/.06] = \$44,160.52 e) PV = FV / (1+r)^t = \$8,000 / (1+.08)^5 =
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Unformatted text preview: \$5,444.67 therefore choose 5 in years f) PV = FV / (1+r)^t = \$3,000 / (1+.07)^4 = \$2,288.69 g) FVA = CF[{(1+r)^t – 1} / r] = \$1,200[{(1+.09)^15 – 1} / 0.09] = \$35,233.10 FVA = CF[{(1+r)^t – 1} / r] = \$1,200[{(1+.10)^15 – 1} / 0.10] = \$38,126.98 The difference is 2,893.88 4) a) PV = \$30,000.00 b) PV = FV / (1+r)^t = \$40,000 / (1+.05)^5 = \$31,341.05 c) PV = FV / (1+r)^t = \$10,000 / (1+.05) + \$25,000 / (1.05)^3 = \$31,119.75 d) PVA = CF[{1 – 1 / (1+r)^t}/r] = \$4,000 [{1 – 1 / (1.05)^10}/.05] = \$30,886.94 + \$4,000 = \$34,886.94 5) a) 72/2 = 36 years b) 72/4 = 18 years c) 72/6 = 12 years d) 72/8 = 9 years e ) 72/10 = 7.2 years...
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