CHAPTER 2PROBLEMSolved[1]

# CHAPTER 2PROBLEMSolved[1] - CHAPTER 2 PROBLEMS 1.What would...

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C HAPTER 2 PROBLEMS 1.What would the future value of \$100 be after 5 years at 10% compound interest? a. \$161.05 b.\$134.54 c.\$127.84 d.\$151.29 e.\$143.65 . FV of a lump sum N 5 I/YR 10% PV -\$100 PMT \$0 FV \$161.05 Excel USE FV FUNCTION FORMULA IS =100*(1+I)^N N 5 INT 0.1 PRIN 100 161 FORMULA IS =100*(1+I)^n Fv tables multiply the principal times the FVIF FUTURE VALUE OF \$1 n 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 10 1.1046 2 1.1605 4 1.2189 9 1.2800 8 1.3439 2 1.4106 0 1.4802 4 1.5529 7 1.6288 9

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2 .PV of a lump sum i . Suppose a U.S. government bond promises to pay \$2,249.73 three years from now. If the going interest rate on 3-year government bonds is 6%, how much is the bond worth today? a.\$2,011.87 b.\$2,591.45 c.\$2,324.89 d. \$1,888.92 e.\$2,854.13
i. PV of a lump sum N 3 I/YR 6% PV \$1,888.92 PMT \$0 FV -2,249.73 In Excel click on function wizard and enter data FORMULA IS =PV(rate,time,pymnt=0,FV,type=0) FV 2249.73 INT RATE 0.06 PV TIME 3 PV (\$1,888.92) C an also use the PV table Multiply 2249.63 times .83692 to get 1888.92 n1%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%6.0%30.970590.956320.942320.928600.91514 0.901940.889000.876300.86384 0.83962 3. Interest rate on a simple lump sum investment I . The U.S. Treasury offers to sell you a bond for \$613.81.

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## This note was uploaded on 09/05/2010 for the course FINANCE MT217-04 taught by Professor Denise during the Spring '10 term at Kaplan University.

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CHAPTER 2PROBLEMSolved[1] - CHAPTER 2 PROBLEMS 1.What would...

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