Ch05sol - H5.1. Solution to Problem 5.6 5.6. Calculating...

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H5.1. Solution to Problem 5.6 5.6. Calculating Interest Rates: Assume the total cost of a college education in Bangkok will be 250,000 baht when your child enters college in 18 years. You presently have 43,000 baht to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education? To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is: FV = PV(1 + r ) t Solving for r , we get: r = (FV / PV) 1/ t – 1 = ( ฿ 250,000 / ฿ 43,000) 1/18 – 1 = 10.27%
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H5.2. Solution to Problem 5.10 5.10. Calculating Present Values: You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100 th birthday (assuming you’re around to collect), 80 years from now. What is the present value of your windfall if the
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This note was uploaded on 04/13/2010 for the course TECHNOLOGY 032913 taught by Professor Hong during the Spring '08 term at 서울대학교.

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Ch05sol - H5.1. Solution to Problem 5.6 5.6. Calculating...

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