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week 2 problems

# week 2 problems - Chapter 4 do#3 Calculating Present values...

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Calculating Present values: For each of the following, compute the present value: Present Value Years Interest Rate Future Value \$10,823.02 12 4% 17,328 \$29,411.69 4 9% 41,517 \$128,928.43 16 12% 790,382 \$72,388.42 21 11% 647,816 PV=FV/(1+r) t =17,328 /(1+0.04)^12=\$10,823.02 #9, Calculating the number of periods. You’re trying to save to buy a new \$160,000 Ferrari. You have \$25,000 today that can be invested at your bank. The bank pays 4.7 percent annual interest on its account. How long will it be before you have enough to buy the car Present value=FV/ (1+r) ^t Solving for t: t=In( FV/PV)/In(1+r) t=In(160,000/\$25,000)/In 1.047=58.93 years #14, Calculating Rates of return Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, Sotheby’s sold the edges degas sculpture petite denseuse de quatorze ans at auction for a price of \$10,377,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of \$12,377,500. What was his annual rate of return on this sculpture? FV=PV (1+r) ^t

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week 2 problems - Chapter 4 do#3 Calculating Present values...

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