Chapter 5 & 6 Solutions

Chapter 5 & 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, Talikas 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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This note was uploaded on 08/27/2008 for the course FIN 200 taught by Professor Delcorral during the Spring '08 term at Loyola New Orleans.

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Chapter 5 & 6 Solutions - $493.33 (assuming the...

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