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Unformatted text preview: HOMEWORK #1 SUGGESTED SOLUTIONS 1 25 Years 2 20 Years 3 0.39 PV($1) 75,000 Payment 250,000 PVA 2.5940 FV($1) 9% Interest Rate 6% Interest Rate 736,693.47 PVA 21,796.14 Payment 4 1000 Investment 5 7 Years Future Value of an Annuity w/o Growth: 10% Nominal Rate 711,711 FVA 4% Inflation 7.11% Interest Rate 5.8% Real Rate 81,964.50 1,057.69 Real Value These are 10 payments 6a 1,000,000 Payment 6b 10 Years 6c 1,000,000 Today 50 Years 1,000,000 Payment 1,000,000 Payment 11% Interest Rate 11% Interest Rate 11% Interest Rate 5,418.15 PV(Payment) 5,889,232 PVA(Payment) 6,889,232 PVA(Payment) NB These are 10 payments NB These are 11 payments 6d 1,000,000 Payment 6e 10 Years 6e 10 Years Forever Years 1,000,000 Payment 1,000,000 Payment 11% Interest Rate 11% Interest Rate 11% Interest Rate 9,090,909 PVP(Payment) 16,722,009 FVA(Payment) 16,722,009 FVA(Payment) 7 a With 0.0% financing, we pay $416.67 per month for 60 months. With the cash back offer, you can achieve the following payments: Payment = 416.67 PVA(6% Loan) = 22000.00 Months = 60 Months = 60 Interest Rate = 0.5% Interest Rate = 0.5% This set of payments is an annuity and its present value is: For an annuity with this present value, the set of payments of is: PVA(0% Financing) = 21552.32 Payment = 425.32 b Payment ( CF 1 ) The two options require you to decide which set of payments youd prefer to make: 0.0% on a higher purchase price or regular bank financing on a The two options require you to decide which set of payments youd prefer to make: 0....
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 Spring '09
 Narg

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