ACCT251E6-10through-13Sol - EXERCISE 6-10 (1015 minutes)...

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EXERCISE 6-10 (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 20-period 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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EXERCISE 6-11 (10–15 minutes) (a) Total interest = Total payments—Amount owed today
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ACCT251E6-10through-13Sol - EXERCISE 6-10 (1015 minutes)...

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