ICE 303 Chapter 3 Suggested Answers to Selected End of Chapt

ICE 303 Chapter 3 Suggested Answers to Selected End of...

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Answers to Problems 3-2. Present Value: PV = FV n x ( 29 + n r 1 1 or FV n x (PVF r%, n ) PV = $100 x (1.08) -6 PV = $100 x (.6302) PV = $63.02 3-9. Investment A: $2,750 x (1.06) 15 = $6,590.54 Investment B: $900 x 1.09 5 = $1,384.76 $1,000 x 1.09 4 = $1,411.58 $1,200 x 1.09 3 = $1,554.03 $1,500 x 1.09 2 = $1,782.15 $1,800 x 1.09 1 = $1,962.00 $8,094.52 Investment C: $1,200 x [(1.10 10 – 1)/0.10] = $19,124.91 Investment D: $19,124.91 x 1.10 = $21,037.40 3-12. a. End of year ( t ) Budget Shortfall x (1 + .08) -t = Present Value 1 $5,000 x .925926 = $4,630 2 4,000 x .857339 = 3,429 3 6,000 x .793832 = 4,763 4 10,000 x .735030 = 7,350 5 3,000 x .680583 = 2,042 $22,214 An initial deposit of $22,214 would be needed to fund the shortfall for the pattern shown in the table. b. An increase in the earnings rate would reduce the amount calculated in part a . Lecture 8 Answers to Problems 3-21. a. $2,000 ÷ 0.075 = $26,666.67 b. $2,000 ÷ (0.075 – 0.03) = $44,444.44
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This note was uploaded on 03/18/2008 for the course ICE 303 taught by Professor Roberts during the Spring '08 term at UVA.

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ICE 303 Chapter 3 Suggested Answers to Selected End of...

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