C4 P2-5 7 11 21 22 26 Solution

C4 P2-5 7 11 21 22 26 Solution - Chapter 4, Problem 2 To nd...

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Chapter 4, Problem 2 To fnd the FV o± a lump sum, we use: FV = PV(1 + r) t FV = $3,150(1.18) 6 = $ 8,503.60 FV = $8,453(1.06) 19 = $ 25,575.39 FV = $89,305(1.11) 13 = $346,796.33 FV = $227,382(1.05) 29 = $935,935.14 Chapter 4, Problem 3 To fnd the PV o± a lump sum, we use: PV = FV / (1 + r) t PV = $17,328 / (1.04) 12 = $ 10,823.02 PV = $41,517 / (1.09) 4 = $ 29,411.69 PV = $790,382 / (1.12) 16 = $128,928.43 PV = $647,816 / (1.11) 21 = $ 72,388.42 Chapter 4, Problem 4 To answer this question, we can use either the FV or the PV ±ormula. Both will give the same answer since they are the inverse o± each other. We will use the FV ±ormula, that is: FV = PV(1 + r) t Solving ±or r, we get: r = (FV / PV) 1 / t – 1 FV = $1,381 = $715(1 + r) 6 r = ($1,381 / $715) 1/6 – 1 r = 0.1160 or 11.60% FV = $1,718 = $905(1 + r) 7 r = ($1,718 / $905) 1/7 – 1 r = 0.0959 or 9.59% FV = $141,832 = $15,000(1 + r) 18 r = ($141,832 / $15,000) 1/18 – 1 r = 0.1329 or 13.29% FV = $312,815 = $70,300(1 + r) 21 r = ($312,815 / $70,300) 1/21 – 1 r = 0.0737 or 7.37% Chapter 4, Problem 5 To answer this question, we can use either the FV or the PV ±ormula. Both will give the same answer since they are the inverse o± each other. We will use the FV ±ormula, that is: FV = PV(1 + r) t
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Solving for t, we get: t = ln(FV / PV) / ln(1 + r) FV = $1,105 = $250 (1.09) t t = ln($1,105 / $250) / ln 1.09 t = 17.25 or 18 years
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This note was uploaded on 04/05/2011 for the course FIN 350 taught by Professor Debruinne during the Winter '11 term at Grand Valley State University.

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C4 P2-5 7 11 21 22 26 Solution - Chapter 4, Problem 2 To nd...

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