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Unformatted text preview: Value of the investment = A*(PVIFA @ i%, N) = 4,500*([email protected]%, 15) = 4,500*8.5595 = $38,517.75 N = 40 years Value of the investment = A*(PVIFA @ i%, N) = 4,500*([email protected]%, 40) = 4,500*11.9246 = $53,660.70 N = 75 years Value of the investment = A*(PVIFA @ i%, N) = 4,500*([email protected]%, 75) = 4,500*12.4611 = $53,660.70 N = Forever Value of investment = A/i = 4,500/0.08 = $56,250 # 15 Effective rate is calculated by: EAR = (1 + APR/m) m  1 When APR = 12% and quarterly compounded, EAR = (1 + 0.12/4) 4 – 1 EAR = (1.03)4 – 1 = 1.1255 – 1 = 0.1255 or 12.55% When APR = 9% and monthly compounded, EAR = (1 + 0.09/12) 12 – 1 EAR = (1.0075)12 – 1 = 1.0938 – 1 = 0.0938 or 9.38% When APR = 13% and daily compounded, EAR = (1 + 0.13/365)365 – 1 EAR = (1.000356)365 – 1 = 1.1388 – 1 = 0.1388 or 13.88% When APR = 11% and infinitely compounded, EAR = e0.11 – 1 EAR = 1.1163 – 1 = = 0.1163 or 11.63% in 20 sent value of this liability?...
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This note was uploaded on 10/24/2010 for the course MBA 713 taught by Professor Whitmer during the Spring '10 term at Otterbein University .
 Spring '10
 Whitmer

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