chap2 solutions_rev

chap2 solutions_rev - 2-9a.1||\$500(1.06 = \$530.00-500FV...

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Unformatted text preview: 2-9a.1||\$500(1.06) = \$530.00.-500FV = ?Using a financial calculator, enter N = 1, I/YR = 6, PV = -500, PMT = 0, and FV = ? Solve for FV = \$530.00.b.12|||\$500(1.06)2 = \$561.80.-500FV = ?Using a financial calculator, enter N = 2, I/YR = 6, PV = -500, PMT = 0, and FV = ? Solve for FV = \$561.80.c.1||\$500(1/1.06) = \$471.70.PV = ?500Using a financial calculator, enter N = 1, I/YR = 6, PMT = 0, and FV = 500, and PV = ? Solve for PV = \$471.70.d.12|||\$500(1/1.06)2 = \$445.00.PV = ?500Using a financial calculator, enter N = 2, I/YR = 6, PMT = 0, FV = 500, and PV = ? Solve for PV = \$445.00.2-10a.12345678910|||||||||||\$500(1.06)10 = \$895.42.-500FV = ?Using a financial calculator, enter N = 10, I/YR = 6, PV = -500, PMT = 0, and FV = ? Solve for FV = \$895.42.b.12345678910|||||||||||\$500(1.12)10 = \$1,552.92.-500FV = ?Using a financial calculator, enter N = 10, I/YR = 12, PV = -500, PMT = 0, and FV = ? Solve for FV = \$1,552.92.Chapter 2: Time Value of MoneyIntegrated Case16%6%6%6%6%12%c.12345678910|||||||||||\$500/(1.06)10 = \$279.20.PV = ?500Using a financial calculator, enter N = 10, I/YR = 6, PMT = 0, FV = 500, and PV = ? Solve for PV = \$279.20.2Integrated CaseChapter 2: Time Value of Money6%d.12345678910|||||||||||PV = ?1,552.90\$1,552.90/(1.12)10 = \$499.99.Using a financial calculator, enter N = 10, I/YR = 12, PMT = 0, FV = 1552.90, and PV = ? Solve for PV = \$499.99.\$1,552.90/(1.06)10 = \$867.13.Using a financial calculator, enter N = 10, I/YR = 6, PMT = 0, FV = 1552.90, and PV = ? Solve for PV = \$867.13.e.The present value is the value today of a sum of money to be received in the future. For example, the value today of \$1,552.90 to be received 10 years in the future is about \$500 at an interest rate of 12%, but it is approximately \$867 if the interest rate is 6%. Therefore, if you had \$500 today and invested it at 12%, you would end up with \$1,552.90 in 10 years. The present value depends on the interest rate because the interest rate determines the amount of interest you forgo by not having the money today.2-11a.200020012002200320042005||||||-612 (in millions)With a calculator, enter N = 5, PV = -6, PMT = 0, FV = 12, and then solve for I/YR = 14.87%.b.The calculation described in the quotation fails to consider the compounding effect. It can be demonstrated to be incorrect as follows:\$6,000,000(1.20)5 = \$6,000,000(2.48832) = \$14,929,920,which is greater than \$12 million. Thus, the annual growth rate is less than 20%; in fact, it is about 15%, as shown in part a....
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chap2 solutions_rev - 2-9a.1||\$500(1.06 = \$530.00-500FV...

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