ch06 - SOLUTIONS TO B EXERCISES E6-1B (510 minutes) Rate of...

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SOLUTIONS TO B EXERCISES E6-1B (5–10 minutes) Rate of Interest Number of Periods 1. a. 8% 8 b. 4% 40 c. 5% 20 2. a. 8% 25 b. 6% 30 c. 4% 28 E6-2B (5–10 minutes) (a) Simple interest of $800 per year X 10 $ 8,000 Principal 10,000 Total withdrawn $18,000 (b) Interest compounded annually—Future value of 1 @ 8% for 10 periods 2.15892 X $10,000 Total withdrawn $21,589.20 (c) Interest compounded semiannually—Future value of 1 @ 4% for 20 periods 2.19112 X $10,000 Total withdrawn $21,911.20 E6-3B (10–15 minutes) (a) $14,000 X 1.33823 = $18,735.22 (b) $14,000 X .46651 = $6,531.14 (c) $14,000 X 27.15211 = $380,129.54 (d) $14,000 X 7.46944 = $104,572.16 6-1
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E6-4B (15–20 minutes) (a) Future value of an ordinary annuity of $12,000 a period for 20 periods at 6% $441,427.08 ($12,000 X 36.78559) Factor (1 + .06) X 1.06 Future value of an annuity due of $12,000 a period at 6% $467,912.70 (b) Present value of an ordinary annuity of $7,500 for 30 periods at 8% $84,433.35 ($7,500 X 11.25778) Factor (1 + .08) X 1.08 Present value of annuity due of $7,500 for 30 periods at 8% $91,188.02 (Or see Table 6-5 which gives $91,188.08) (c) Future value of an ordinary annuity of $6,000 a period for 15 periods at 8% $162,912.66 ($6,000 X 27.15211) Factor (1 + .08) X 1.08 Future value of an annuity due of $6,000 a period for 15 periods at 8% $175,945.66 (d) Present value of an ordinary annuity of $3,000 for 6 periods at 10% $13,065.78 ($3,000 X 4.35526) Factor (1 + .10) X 1.10 Present value of an annuity date of $3,000 for 6 periods at 10% $14,372.36 (Or see Table 6-5) 6-2
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E6-5B (10–15 minutes) (a) $50,000 X 5.33493 = $266,746.50. (b) $50,000 X 8.85137 = $442,568.50. (c) ($50,000 X 3.16986 X .56447 = $89,464.54. or (6.14457 – 4.35526) X $50,000 = $89,465.50 (difference of $0.96 due to rounding). E6-6B (12–17 minutes) (a) $500,000 X .21455 = $107,275.00 + $50,000 X 9.81815 = 490,907.50 $598,182.50 (b) $500,000 X .14864 = $ 74,320.00 + $50,000 X 8.51356 = 425,678.00 $499,998.00 The answer should be $500,000; the above computation is off by $2 due to rounding. (c) $500,000 X .10367 = $ 51,835.00 + $50,000 X 7.46944 = 373,472.00 $425,307.00 6-3
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E6-7B (10–15 minutes) (a) Present value of an ordinary annuity of 1 for 4 periods @ 10% 3.16986 Annual withdrawal X $60,000 Required fund balance on June 30, 2013 $190,191.60 (b) Fund balance at June 30, 2013 $190,191.60 = $40,980.74 Future amount of ordinary annuity at 10%
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ch06 - SOLUTIONS TO B EXERCISES E6-1B (510 minutes) Rate of...

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