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Tutorial 02 Solutions 2009 - EFN406 TUTORIAL TWO Tutorial 2...

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EFN406 1 TUTORIAL TWO Tutorial 2 Questions BF, page 71, Problems 3, 8, 12, 14, 17, 34, 35, 40, 44, 46, 8, 49, 50. Tutorial 2 Solutions 1. P3. Rate = [$ Interest/Principal] * Time] = [$400/$10 000] * (365/30) = 48.67% pa 2. P8. (a) FV = PV (1 + i) n FV = $1 000 * 1.08 10 = $2 158.92 Interest Component= $2 158.92 - $1 000 = $1 158.92 (b) $ Interest = Principal * Rate * Time = $1 000 * .08 * 10 = $800 3. P12. FV = $17 200 * 1.025 8 = $20 956.53 4. P14. (a) PV = FV (1 + i) -n PV = $1 000 * 1.12 -5 = $567.43 (b) PV = $1 000 * 1.12 -10 = $321.97 (c) PV = $1 000 * 1.06 -5 = $747.26 (d) PV = $16 205 * 1.015 -12 = $13 553.66 (e) PV = $1m * 1.15 -40 = $3 733 (f) PV = $1m * 1.15 -100 = $0.85 5. P17. (a) i = (1+ i m /m) m - 1 i = (1+ .18/2) 2 – 1 = 18.81% (b) i = (1+ .18/12) 12 – 1 = 19.56% (c) i = (1+ .18/26) 26 – 1 = 19.65% (d) i = (1+ .18/365) 365 – 1 = 19.716% (e) i = e im – 1 = e .18 – 1 = 19.722% 6. P34. PV = R (1 - (1+i) -n )/i R = $800000/[(1 - 1.0154 -120 )/.0154] = 14663 1st month interest = .0154 * $800 000 = $12 320 Principal Reduction = $14663 - $12320 = $2343 With 1 payment to go, amount owing = $14663 * 1.0154 -1 = $14441 7. P35. PV = $14663 * (1 - 1.0154 -98 )/.0154 + $14663 = 739201 8. P40. The amount he requires by 65 to pay for his retirement is a PV, so
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