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Unformatted text preview: 1/111 1 = 8.41% To find the FV of the first prize, we use: FV = PV(1 + r ) t FV = $1,170,000(1.0841) 34 = $18,212,056.26 14. To find the PV of a lump sum, we use: PV = FV / (1 + r) t PV = $485,000 / (1.2590) 67 = $0.10 19. We need to find the FV of a lump sum. However, the money will only be invested for six years, so the number of periods is six. FV = PV(1 + r ) t FV = $25,000(1.079) 6 = $35,451.97 20. To answer this question, we will use the FV formula, that is: FV = PV(1 + r ) t Solving for t , we get: t = ln(FV / PV) / ln(1 + r ) t = ln($100,000 / $10,000) / ln(1.11) = 22.06 So, the money must be invested for 22.06 years. However, you will not receive the money for another two years. From now, youll wait: 2 years + 22.06 years = 24.06 years...
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This note was uploaded on 07/21/2009 for the course BUAD 306 taught by Professor Selvili during the Spring '07 term at USC.
 Spring '07
 Selvili
 Finance, Future Value, Interest

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