On your financial calculator, compute I:
N
I
PV
PMT
FV
4
CPT
100
200
18.92
b.
Find
t
, the number of periods, such that:
200 = 100 × (1.125)
t
.
On your financial calculator, compute N:
N
I
PV
PMT
FV
CPT
12.5
100
200
5.88
4.
a.
The total present value is the sum of the present values of the three payments, discounted
at 7% per year. The timeline looks like this:
0
1
2
3
PV = ?
180,000
50,000
70,000
30
.
224
,
168
07
.
1
000
,
180
1
=
=
PV
94
.
671
,
43
07
.
1
000
,
50
2
2
=
=
PV
85
.
140
,
57
07
.
1
000
,
70
3
3
=
=
PV
Sum =
$269,037.09
b.
The three equal payments must have a present value of $269,037.09. Therefore, find
PMT such that PV = 269,037.09.
Solve for the payment amount,
C
, in the annuity
present value formula:
+

×
=
r
r
C
APV
t
)
1
(
1
1
;

=
]
07
.
)
07
.
1
(
1
1
[
09
.
037
,
269
$
3
C
;
C = $102,517.03
On your financial calculator:
N
I
PV
PMT
FV
3
7
269,037.09
CPT
102,517.0
3
F301 TVM practice set I solutions
2