CHAPTER 5
B-2
4.
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
FV = $297 = $240(1 +
r
)
2
;
r
= ($297 / $240)
1/2
– 1
= 11.24%
FV = $1,080 = $360(1 +
r
)
10
;
r
= ($1,080 / $360)
1/10
– 1
= 11.61%
FV = $185,382 = $39,000(1 +
r
)
15
;
r
= ($185,382 / $39,000)
1/15
– 1
= 10.95%
FV = $531,618 = $38,261(1 +
r
)
30
;
r
= ($531,618 / $38,261)
1/30
– 1 =
9.17%
5.
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
t
, we get:
t
= ln(FV / PV) / ln(1 +
r
)
FV = $1,284 = $560(1.09)
t
;
t
= ln($1,284/ $560) / ln 1.09
=
9.63 years
FV = $4,341 = $810(1.10)
t
;
t
= ln($4,341/ $810) / ln 1.10
= 17.61 years
FV = $364,518 = $18,400(1.17)
t
;
t
= ln($364,518 / $18,400) / ln 1.17
= 19.02 years
FV = $173,439 = $21,500(1.15)
t
;
t
= ln($173,439 / $21,500) / ln 1.15
= 14.94 years
6.
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
r
= ($290,000 / $55,000)
1/18
– 1 = .0968 or 9.68%