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EXERCISE 610 (10–15 minutes)
(a)
The number of interest periods is calculated by first dividing the
future value of $1,000,000 by $148,644, which is 6.72748—the value
$1.00 would accumulate to at 10% for the unknown number of
interest periods. The factor 6.72748 or its approximate is then
located in the Future Value of 1 Table by reading down the 10%
column to the 20period line; thus, 20 is the unknown number of
years Mark must wait to become a millionaire.
(b)
The unknown interest rate is calculated by first dividing the future
value of $1,000,000 by the present investment of $239,392, which is
4.17725— the amount $1.00 would accumulate to in 15 years at an
unknown interest rate. The factor or its approximate is then
located in the Future Value of 1 Table by reading across the 15
period line to the 10% column; thus, 10% is the interest rate Elvira
must earn on her investment to become a millionaire.
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View Full DocumentEXERCISE 611 (10–15 minutes)
(a)
Total interest = Total payments—Amount owed today
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 Spring '09

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