Chapter_04A

Chapter_04A - of consumption over time to fit their...

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Chapter 4, Appe Problems 1-5 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak and "Solver Add-In."
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Chapter 4, Appendix Question 1 Input area: Current salary $80,000 Next year's salary $90,000 Desired current consumption $100,000 Interest rate 10.00% Output area: Consumption potential next year $68,000.00
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Chapter 4, Appendix Question 2 Input area: Current salary $50,000 Next year's salary $60,000 Desired current consumption $35,000 Interest rate 12.00% Output area: Consumption potential next year $76,800.00
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Chapter 4, Appendix Question 3 Output area: Financial markets arise to facilitate borrowing and lending between individuals. By borrowing and lending, people can adjust their pattern
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Unformatted text preview: of consumption over time to fit their particular preferences. This allows corporations to accept all positive NPV projects, regardless of the inter-temporal consumption preferences of the shareholders. Chapter 4, Appendix Question 4 Input area: Current income and consumption $40 Period 1 income and consumption $50 Maximum current consumption $86 New maximum current consumption $98 Output area: a. Market interest rate 8.70% b. NPV of investment $12.00 c. Equal consumption amount $51.04 Chapter 4, Appendix Question 5 Input area: Current wealth $60,000 Maximum current consumption $80,000 Maximum consumption next year $90,000 Desired current consumption $20,000 Desired consumption next year $67,500 Output area: a. Market interest rate 12.50% b. NPV of investment $(60,000.00) c. Equal consumption amount $10,588.24...
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Chapter_04A - of consumption over time to fit their...

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