CHAPTER 5-2 - FV = PV(1 + r ) t Solving for r , we get: r =...

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FV = PV(1 + r ) t FV = $50(1.045) 105 = $5,083.71 13. 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 = ($1,260,000 / $150) 1/112 – 1 = .0840 or 8.40% To find the FV of the first prize, we use: FV = PV(1 + r ) t FV = $1,260,000(1.0840) 33 = $18,056,409.94 14. 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:
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Unformatted text preview: FV = PV(1 + r ) t Solving for r , we get: r = (FV / PV) 1 / t – 1 r = ($43,125 / $1) 1/113 – 1 = .0990 or 9.90% 15. 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 = ($10,311,500 / $12,377,500) 1/4 – 1 = – 4.46% Notice that the interest rate is negative. This occurs when the FV is less than the PV....
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This note was uploaded on 07/15/2010 for the course FINANCE 318 taught by Professor Spurlin during the Spring '08 term at LA Tech.

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