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Time Line: 0 1 2 3 4 5 6 Years 8% ├────── - ───┼──── - ─────┼────────┼─────────┼─────────┼────────┤ PV = ? FV = 10,000 Numerical solution: PV = \$10,000 /(1.08 6 ) = \$10,000 /(1.5869) = \$6,301.70. Financial calculator solution: Inputs: N = 6; I = 8; PMT = 0; FV = -10,000. Output: FV = \$6,301.70. 5. Suppose you invested \$1,000 in stocks 10 years ago. If your account is now worth \$2,839.42, what rate of return did your stocks earn? Time Line: 0 i = ? 1 10 ├──────────────┼──────── ·· · ─────────┤ 1,000 2,839.42 Numerical solution: \$2,839.42 = \$1,000(1+i) 10 (1+i) 10 =2,839.42/1,000=2.8394 (1+i)=2.8394 (1/10) = 1.11 i 11%. Financial calculator solution: Inputs: N = 10; PV = -1,000; PMT = 0; FV = 2,839.42. Output: I = 11.0%. 6. Assume that you will receive \$2,000 a year in Years 1 through 5, \$3,000 a year in Years 6 through 8, and \$4,000 in Year 9, with all cash flows to be received at the end of the year. If you require a 14 percent rate of return, what is the present value of these cash flows?
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