6thA_ch06HWSolutionsPlus

6thA_ch06HWSolutionsPlus - CHAPTER 6 Accounting and the...

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CHAPTER 6 Accounting and the Time Value of Money EXERCISE 6-1 (a) (b) Rate of Interest Number of Periods 1. a. 9% 9 b. 2% 20 c. 5% 30 2. a. 9% 25 b. 4% 30 c. 3% 28 EXERCISE 6-2 (a) Simple interest of $2,400 ($30,000 X 8%) per year X 8. . $19,200 Principal. ............................................................................. 30,000 Total withdrawn. ....................................................... $49,200 (b) Interest compounded annually—Future value of 1 @ 8% for 8 periods. ................................................... 1.85093 X $30,000 Total withdrawn. ....................................................... $55,527.90 (c) Interest compounded semiannually—Future value of 1 @ 4% for 16 periods. ................................... 1.87298 X $30,000 Total withdrawn. ........................................................ $56,189.40 EXERCISE 6-3 (a) $9,000 X 1.46933 = $13,223.97. (b) $9,000 X .43393 = $3,905.37. (c) $9,000 X 31.77248 = $285,952.32. (d) $9,000 X 12.46221 = $112,159.89.
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EXERCISE 6-4 (a) Future value of an ordinary annuity of $5,000 a period for 20 periods at 8% $228,809.80 ($5,000 X 45.76196) Factor (1 + .08) X 1.08 Future value of an annuity due of $5,000 a period at 8% $247,114.58 (b) Present value of an ordinary annuity of $2,500 for 30 periods at 10% $23,567.28 ($2,500 X 9.42691) Factor (1 + .10) X 1.10 Present value of annuity due of $2,500 for 30 periods at 10% $25,924.00 (Or see Table 6-5 which gives $25,924.03) (c) Future value of an ordinary annuity of $2,000 a period for 15 periods at 10% $63,544.96 ($2,000 X 31.77248) Factor (1 + 10) X 1.10 Future value of an annuity due of $2,000 a period for 15 periods at 10% $69,899.46 (d) Present value of an ordinary annuity of $3,000 for 6 periods at 9% $13,457.76 ($3,000 X 4.48592) Factor (1 + .09) X 1.09 Present value of an annuity due of $3,000 for 6 periods at 9% $14,668.96 (Or see Table 6-5) EXERCISE 6-5 (a) $50,000 X 4.96764 = $248,382. (b) $50,000 X 8.31256 = $415,628. (c) ($50,000 X 3.03735 X .50663) = $76,940.63. or (5.65022 – 4.11141) X $50,000 = $76,940.50 (difference of $.13 due to rounding).
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EXERCISE 6-6 (a) Future value of $12,000 @ 10% for 10 years ($12,000 X 2.59374) = $31,124.88 (b) Future value of an ordinary annuity of $620,000 at 10% for 15 years ($620,000 X 31.77248) $19,698,937.00 Deficiency ($20,000,000 – $19,698,937) $301,063.00 (c) $75,000 discounted at 8% for 10 years: $75,000 X .46319 = $34,739.25 Accept the bonus of $40,000 now. (Also, consider whether the 8% is an appropriate discount rate since the president can probably earn compound interest at a higher rate without too much additional risk.) EXERCISE 6-7 (a) $100,000 X .31524 = $ 31,524.00 + $10,000 X 8.55948 = 85,594.80 $117,118.80 (b) $100,000 X .23939
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6thA_ch06HWSolutionsPlus - CHAPTER 6 Accounting and the...

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