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Unformatted text preview: #1 Payment of $100,000 arrives in period 4. (a) (b) The present value = 100,000/(1.06 4 )= The value in time period 25 = 100,000 x (1 Alternatively, you can calculate this as $79 $79,209.37 $339,956.36 $339,956.36 ($960.89) 1.06 21 ) = 9,209.37 x (1.06 25 ) = #2 I. Cost of RV in present value terms if he pays cash = II. PV of paying 72 monthly payments of $745= =PV(0.07/12,6*12,745) = $43,697.56 Option II has a lower cost because the PV is lower. = $44,000.00 4(a) If you will be making equal deposits into a retirement (with each payment at the end of each year 1 through 10), year if the account earns 5% compounded annually and yo $200,000 after 30 years (in time 30)? There are many ways to do this. One is to do all calculatio Step 1: PV of 200,000 in 30 years at 5%: Step 2: Annuity with PV = $46,275.49 and 10 equal annua So 10 payments of $5,992.89 is the answer. Alternative method 1: Step 1: Find FV in time 10 of 200,000 in time 30: Step 2: Solve for the payment that equals FV10 of 75,377. (b)...
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 Spring '08
 Mohr

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