6thA_ch06HWSolutionsPlus

# 6thA_ch06HWSolutionsPlus - CHAPTER 6 Accounting and the...

This preview shows pages 1–4. Sign up to view the full content.

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 ............................................................................. 30,000 Total withdrawn.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 ................................................... 1.85093 X \$30,000 Total withdrawn.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 ................................... 1.87298 X \$30,000 Total withdrawn.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.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
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).
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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## 6thA_ch06HWSolutionsPlus - CHAPTER 6 Accounting and the...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online