Bus361 Solutions to the suggested problems of Chapter 2

Bus361 Solutions to the suggested problems of Chapter 2 -...

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Unformatted text preview: Chapter 2 Time Value of Money Solutions to End-of-Chapter Problems 2-1 1 2 3 4 5 | | | | | | PV = 10,000 FV 5 = ? FV 5 = $10,000(1.10) 5 = $10,000(1.61051) = $16,105.10. Alternatively, with a financial calculator enter the following: N = 5, I/YR = 10, PV = -10000, and PMT = 0. Solve for FV = $16,105.10. 2-2 5 10 15 20 | | | | | PV = ? FV 20 = 5,000 With a financial calculator enter the following: N = 20, I/YR = 7, PMT = 0, and FV = 5000. Solve for PV = $1,292.10. 2-3 18 | | PV = 250,000 FV 18 = 1,000,000 With a financial calculator enter the following: N = 18, PV = -250000, PMT = 0, and FV = 1000000. Solve for I/YR = 8.01% 8%. 2-4 N = ? | | PV = 1 FV N = 2 $2 = $1(1.065) N . With a financial calculator enter the following: I/YR = 6.5, PV = -1, PMT = 0, and FV = 2. Solve for N = 11.01 11 years. 10% 7% 6.5% I/YR = ? 2-5 1 2 N 2 N 1 N | | | | | | PV = 42,180.53 5,000 5,000 5,000 5,000 FV = 250,000 Using your financial calculator, enter the following data: I/YR = 12; PV = -42180.53; PMT = -5000; FV = 250000; N = ? Solve for N = 11. It will take 11 years to accumulate $250,000. 12% 2-6 Ordinary annuity: 1 2 3 4 5 | | | | | | 300 300 300 300 300 FVA 5 = ? With a financial calculator enter the following: N = 5, I/YR = 7, PV = 0, and PMT = 300. Solve for FV = $1,725.22. Annuity due: 1 2 3 4 5 | | | | | | 300 300 300 300 300 With a financial calculator, switch to BEG and enter the following: N = 5, I/YR = 7, PV = 0, and PMT = 300. Solve for FV = $1,845.99. Dont forget to switch back to END mode. 2-7 1 2 3 4 5 6 | | | | | | | 100 100 100 200 300 500 PV = ? FV = ? Using a financial calculator, enter the following: CF = 0; CF 1 = 100; N j = 3; CF 4 = 200 (Note calculator will show CF 2 on screen.); CF 5 = 300 (Note calculator will show CF 3 on screen.); CF 6 = 500 (Note calculator will show CF 4 on screen.); and I/YR = 8. Solve for NPV = $923.98. To solve for the FV of the cash flow stream with a calculator that doesnt have the NFV key, do the following: Enter N = 6, I/YR = 8, PV = -923.98, and PMT = 0. Solve for FV = $1,466.24. You can check this as follows: 1 2 3 4 5 6 | | | | | | | 100 100 100 200 300 500 324.00 233.28 125.97 136.05 146 .93 $1,466 .23 2-8 Using a financial calculator, enter the following: N = 60, I/YR = 1, PV = -20000, and FV = 0. Solve for PMT = $444.89....
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This note was uploaded on 04/21/2009 for the course BUS 338W-1 taught by Professor White during the Winter '09 term at University of Michigan-Dearborn.

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Bus361 Solutions to the suggested problems of Chapter 2 -...

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