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