Finance Ch. 5 - Time Value of Money

Finance Ch 5- - Future Value(FV \$560 10.78 8 \$1,284 \$810 19.48 9 \$4,341 \$18,400 15.67 21 \$364,518 \$21,500 17.08 13 \$173,439 Equation FV = PV(1 r t

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Finance 100.1 Chapter 5 Problems 4-6 Presented by Group 6

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Problem 4 Calculating Interest Rates Present Value  (PV) Years Interest Rate Future Value  (FV) \$240 2 \$307 \$360 10 \$896 \$39,000 15 \$174,384 \$38,261 30 \$483,500
Problem 4 Continued Present Value  (PV) Years Interest Rate Future Value  (FV) \$240 2 13.10% \$307 \$360 10 9.55% \$896 \$39,000 15 10.50% \$174,384 \$38,261 30 8.82% \$483,500 Equations: FV=PV(1+r) t    OR %CAGR = (FV/PV) 1/t - 1 Solution: R = (\$307/\$240) 1/2 - 1      = 1.279166667 ½ - 1 = 0.131002505           = 0.131002505 x 100  = 13.1002505 R= 13.10%

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Problem 5 Calculating the Number of Periods Present Value  (PV) Years Interest Rate Future Value  (FV) \$560 8% \$1,284 \$810 9% \$4,341 \$18,400 21% \$364,518 \$21,500 13% \$173,439
Problem 5 Continued Present Value  (PV) Years Interest Rate

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Unformatted text preview: Future Value (FV) \$560 10.78 8% \$1,284 \$810 19.48 9% \$4,341 \$18,400 15.67 21% \$364,518 \$21,500 17.08 13% \$173,439 Equation: FV = PV(1+r) t Or T = In(FV/PV) In (1 + r) Solution: T = In(\$1,284/\$560) In(1+.08) = .8297987 .076961041 = 10.7820618 T = 10.78 years Problem 6 Calculating Interest Rates Given: • College Education will cost \$280,000. • Currently have \$50,000. • Years until you need the money, 18. Problem 6 Calculating Interest Equations: FV=PV(1+r) t OR %CAGR = (FV/PV) 1/t - 1 Solution: R = (\$280,000/\$50,000) 1/18-1 = 5.6 1/18-1 = 0.10043907 = 0.10043907 x 100 = 10.043907 R= 10.04%...
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This note was uploaded on 03/30/2008 for the course H P A 447 taught by Professor Graupensperger,ti during the Spring '08 term at Pennsylvania State University, University Park.

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Finance Ch 5- - Future Value(FV \$560 10.78 8 \$1,284 \$810 19.48 9 \$4,341 \$18,400 15.67 21 \$364,518 \$21,500 17.08 13 \$173,439 Equation FV = PV(1 r t

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