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Chapter 5 &amp; 6 Solutions

# Chapter 5 &amp; 6 Solutions - \$493.33(assuming the...

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Chapter 5 Solutions 1) Barbara would have : FVA = CF[{(1+r)^t – 1} / r] and FV = PV (1+r)^t = \$2,000[{(1+.08)^8 – 1} / 0.08][(1.08)^35] = \$314,532.40 = \$2,000(10.63663)(14.78534) = \$314,532.40 Mary would have: FVA = CF[{(1+r)^t – 1} / r] \$2,000[{(1+.08)^33 – 1} / 0.08 = \$291,901.24 \$2,000(145.95062) = \$291,901.24 2) You will need to earn the following annually: r = (FV/PV)^1/t = (20,000/10,000)^1/10 – 1 = 7.177% Rule 72 72 / 10 = 7.2 years note this is an approximation 3) PV = FV / (1+r)^t = \$30,000 / (1.07)^15 = \$10,873.38 = \$30,000 / (2.75903) = \$10,873.38 4) t = {ln[(FVA/CF)r + 1] / ln(1 + r)} t = {ln[(20,000/2,000)(.08) + 1] / ln(1 + .08)} t = {ln[(10)(.08) + 1] / ln(1.08)} t = {ln[(1.80)] / ln(1.08)} t = 0.58779 / 0.07696 = 7.63746 years 5) FVA = CF[{(1+r)^t – 1} / r] \$6,000[{(1+.07)^22 – 1} / 0.07 = \$294,034.43 (\$6,000 x 49.00574) = \$294,034.43 Chapter 6 Solutions 1) a. Ignoring new purchases, Talika’s balance was \$600 for 14 days and \$400 for 16 days giving an average daily balance of [(\$600*14)+(\$400*16)] / 30 =

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Unformatted text preview: \$493.33 (assuming the balance is actually reduced on the 15th day and a 30-day month). b. Her finance charge would be \$7.89 (\$493.33 x 0.192/12). c. With new purchases, Talika’s balance was \$600 for 4 days, \$750 for 7 days, \$1,050 for 3 days, and \$850 for 16 days. This gives an average daily balance of [(\$600*4)+(\$750*7)+(\$1,050*3)+(\$850*16)] / 30 = \$813.33 (assuming a 30-day month). d. Her finance charge would be \$13.01 (\$813.33 x 0.192/12). e. Assuming new purchases are included, the finance charge using the two-cycle average daily balance method would be \$12.90 ([\$800 + \$813]/2 x 0.192/12). 2) 4/22 \$600.00 balance x 3 days = \$ 1,800.00 4/25 + 17.25 \$617.25 balance x 2 days = 1,234.50 4/27 + \$104.50 \$721.75 balance x 5 days = 3,608.75 5/02 – 15.00 \$706.75 balance x 11 days = 7,774.25 5/13 – 21.00 \$685.75 balance x 9 days = 6,171.75 30 days \$20,589.25 \$20,589.25/30 = \$686.31 finance charge = \$686.31*(.18/12) = \$10.29...
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Chapter 5 &amp; 6 Solutions - \$493.33(assuming the...

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