Solutions to Web Appendix 2A

Solutions to Web Appendix 2A -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Web Appendix 2A Continuous Compounding and Discounting Solutions to Problems 2A-1 FV 15  = $15,000e 0.06(15)  = $36,894.05. 2A-2 PV = FV N /e IN  = $200,000/e 0.09(7)  = $200,000/1.8776= $106,518.36. 2A-3 Daily compounding: FV 2  = PV(1 + 0.07/365) 365(2)  = $1,000(1.15026) = $1,150.26 Continuous compounding: FV 2  = PVe IN  = $1,000e 0.069(2)  = $1,000(1.14798) = $1,147.98 Difference between accounts $               2.28     2A-4 Determine the effective annual rates. a. 10.25% annually = 10.25%. b. 10.0% semiannually =  2 2 10 . 0 1 +  – 1.0 = 0.1025 = 10.25%. c. 9.8% continuously = e 0.098  – 1.0 = 0.10296 = 10.30%. 2A-5 (Constant e = 2.7183 rounded.) $11,572.28 = PVe 0.09(15) $11,572.28 = PVe 1.35 PV = $11,572.28/e 1.35 = $11,572.28/3.85743 = $3,000. Appendix 2A  Continuous Compounding and Discounting Answers and Solutions 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Answers and Solutions Appendix 2A  Continuous Compounding and Discounting
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Solutions to Web Appendix 2A -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online