HW1solutions

HW1solutions - Chapter 5 The Time Value of Money Home Work...

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Chapter 5 The Time Value of Money 5-1 Home Work 1 Solutions 1. b. FV 5 = $1,000(FVIF .06,5 ) = $1,000(1.338) = $1,338 2. a. Present value of $5,000 today = $5,000 b. Present value of $15,000 received in 5 years at 9%: PV 0 = $15,000(PVIF .09,5 ) = $15,000 (0.650) = $9,750 (tables) $9749 (calculator) c. Present value of a 15 year, $1,000 annuity at 9%: PVAN 0 = $1,000 (PVIFA .09,15 ) = $1,000(8.061) = $8,061 Therefore, you prefer $15,000 in five years because it has the highest present value. 4. Alternative a: PVAND 0 = $1,200(PVIFA .08,12 )(1 + 0.08) = $1,200(7.536)(1.08) = $9,766.66 (tables); $9,766.76 (calculator) Alternative b: Present value cost equals $10,000 (given). Therefore, choose Alternative 1 because it has a lower present value cost. 5. b. PV 0 = $50,000 [1 + (0.06/4)] 4x5 = $37,123.52 (calculator) 7. b. PV 0 = $800(0.540) = $432 10. $600,000 = PMT(FVIFA .09,25 ) = PMT(84.701) PMT = $7,083.74 (tables); $7,083.75 (calculator)
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Chapter 5 The Time Value of Money 5-2 11. c. PV 0 = $70(7.843) + $1000(0.059) =
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This note was uploaded on 04/26/2011 for the course FIN 5219 taught by Professor Nadia during the Spring '08 term at Texas Tech.

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HW1solutions - Chapter 5 The Time Value of Money Home Work...

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