Chapter05_xlsSol

# Chapter05_xlsSol - Problems Problem 5.2 Problem 5-3 Problem...

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Problems Problem 5.2 Problem 5-3 Problem 5-7 Problem 5-14 Problem 5-15 Problem 5-17 Problem 5-18 Problem 5-25 Problem 5-26 Problem 5-27 Problem 5-28

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Problem 5-2 a. Interest rate 2.50% Compounded every 6 months EAR 5.06% Compare to: 5.00% Choice: 2.50% every 6 months i b. Interest rate 7.50% Compounded every 18 months EAR 4.94% Compare to: 5.00% Choice: 5.00% every 12 months i c. Interest rate 0.50% Compounded every 1 months EAR 6.17% Compare to: 5.00% Choice: 0.50% every 1 months i Which do you prefer: a bank account that pays 5% per year (EAR) for three years or An account that pays 2 ½ % every six months for three years? An account that pays 7 ½ % every 18 months for three years? An account that pays ½ % per month for three years?
is better. is better. is better.

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Problem 5-3 Interest rate 6.00% Years between sabbaticals 7 Years of employment 42 Number of sabbaticals 6 Periodic interest rate 50.36% Salary 70000.00 Value today (\$126,964.34) Many academic institutions offer a sabbatical policy. Every seven years a professor is given a year free of teaching and other administrative responsibilities at full pay. For a professor earning \$70,000 per year who works for a total of 42 years, what is the present value of the amount she will earn while on sabbatical if the interest rate is 6% (EAR)?

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Problem 5-7 Annual interest rate 4.00% Years between withdrawals 0.5 Number of withdrawals 8 Tuition payment 10000.00 Value today (\$73,254.81) Your son has been accepted into college. This college guarantees t tuition will not increase for the four years he attends college. The f payment is due in six months. After that, the same payment is due until you have made a total of eight payments. The college offers a allows you to withdraw money every six months and has a fixed A (semiannual) guaranteed to remain the same over the next four yea money must you deposit today if you intend to make no further de like to make all the tuition payments from this account, leaving the when the last payment is made?
that your son’s first \$10,000 tuition e every six months a bank account that APR of 4% ars. How much eposits and would e account empty

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Problem 5-14 Interest rate 9.00% Monthly payment 500.00 Years to pay 4 Current balance \$20,092.39 Extra payment 100.00 19,992.39 \$143.14 9.00% You have an outstanding student loan with required payments of \$500 per
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## This note was uploaded on 12/28/2009 for the course FEWEB CORPFIN taught by Professor Dorsman during the Spring '09 term at Vrije Universiteit Amsterdam.

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Chapter05_xlsSol - Problems Problem 5.2 Problem 5-3 Problem...

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