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02 -- Time Value of Money

# 02 -- Time Value of Money - TimeValueofMoney Chapter5...

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Click to edit Master subtitle style  3/23/11 Time Value of Money Chapter 5 Tutorial 2

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3/23/11 Problem 5- 29 You need to find the “effective periodic rate”  instead of the EAR. This means that you will need to increase your  prices by 3.0449% so that it will not cost you  anything to “carry” the receivables. ( 29 90 12% 1 1 3.0449% 360 EPR = + - =
3/23/11 Problem 5- 30 ( 29 ( 29 1 1 6% 1,000,000 30,000 1 6% 5,000 6% 38.74 25 38.74 63.74 n n Erika n age - - + = + + = = + = N 38.74 I/Y 6 P M T 5,000 PV 30,000 FV -1 M ( 29 ( 29 1 1 20% 1,000,000 30,000 1 20% 5,000 20% 16.04 25 16.04 41.04 n n Kitty n age - - + = + + = = + = N 41.04 I/Y 20 P M T 5,000 PV 30,000 FV -1 M

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3/23/11 Problem 5-30 (b & c) If Erika wishes to reach the investment goal at the same time as Kitty, she will need to  contribute \$35,825.33 per year. ( 29 ( 29 16.04 16.04 16.04 years as Target 1 1 6% 1,000,000 30,000 1 6% 6% 35,825.33 PMT PMT - - + = + + = N 16.04 I/Y 6 P M T 35,825.33 PV 30,000 FV -1 M
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