Wk2_fin370_eze.doc - 1 Question and Problem Set Patrick Eze...

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1 Question and Problem Set Patrick Eze FIN/370 07/23/2018 Karen de Michelis
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2 Week 2 Question and Problem Set Chapter 5 3. Calculating Present Values [LO2] For each of the following, compute the present value: PV=FV(1+r)^n 1. 15451 (1+.09)^13 15451 / 3.0658= 5039.79 PV= 5039.79 2. 51557 (1+.07)^4 51557 / 1.3108= 39332.47 PV= 39332.47 3. 886073 (1+.24)^29 886073 / 511.9516= 1730.7749 PV= 1730.7749 4. 550164 (1+.35)^40 550164 /163437.1347= 3.3662 PV= 3.3662 4. Calculating Interest Rates [LO3] Solve for the unknown interest rate in each of the following: R=(fv/pv)^1/t-1 a) R= (297/181)^1/4-1 (1.641)^1/4-1 1.1318-1= 0.1318 or 13.18%
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3 b) R= (1080/335)^1/18-1 (3.223)^1/18-1 1.0672-1=0.0672 or 6.72% c) R= (185382/48000)^1/19-1 (3.862)^1/19-1 1.0737-1=0.0737 or 7.37% d) R= (531616/40353)^1/25-1 (13.174)^1/25-1 1.1086-1=0.1086 or 10.86% Chapter 6 2. Present Value and Multiple Cash Flows [LO1] Investment X offers to pay you $4,700 per year for eight years, whereas Investment Y offers to pay you $6,700 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent? - annuity *[1-[1+r]^-n]/r 4700*[1-[1.05]^8]/0.05= 4700*6.463213= $30377.10 [email protected]%= $30377.10 [email protected]%= $29007.49 Follow those same steps for both x and y 5% and x and y 15% X @ 15%= 21090.42 Y @ 15%= 22459.44
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4 20. Calculating Loan Payments [LO2, 4] You want to buy a new sports coupe for
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