Solutions-13

# Solutions-13 - Chapter 13Solutions to Problems Problem 1:...

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Chapter 13—Solutions to Problems Problem 1: Solution Answers found using Excel formulas: 1. Amount invested = \$10,000 \$21,589.25 Compounding period = annually Number of years = 10 Annual interest rate = 8% Effective interest rate = 8% # of periods compounded = 10 2. Amount invested = \$5,000 \$8,144.47 Compounding period = semi-annually Number of years = 5 Annual interest rate = 10% Effective interest rate = 5% = 10% / 2 # of periods compounded = 10 = 5 years * 2 3. Amount invested = \$8,000; PV of \$8,000 = \$7,107.90 Compounding period = quarterly Number of years = 4 \$12,825.02 Annual interest rate = 12% Effective interest rate = 3% = 12% / 4 # of periods compounded = 16 = 4 years * 4 Answers found using time value of money tables: 1. Amount invested = \$10,000 =\$10,000 × FVF(.08,10) Compounding period = annually =\$10,000 × 2.1589 Number of years = 10 =\$21,589.00 Annual interest rate = 8% Effective interest rate = 8% # of periods compounded = 10 2. Amount invested = \$5,000 =\$5,000 × FVF(.05,10) Compounding period = semi-annually =\$5,000 × 1.6289 Number of years = 5 =\$8,144.50 Annual interest rate = 10% Effective interest rate = 5% = 10% / 2 # of periods compounded = 10 = 5 years * 2 3. Amount invested = \$8,000 =8,000 × FVF(.03,16) Compounding period = quarterly =8,000 × 1.6047 Number of years = 4 =\$12,837.60 Annual interest rate = 12% Effective interest rate= 3% =12% / 4 # of periods compounded= 16 = 4 years × 4

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Chapter 13—Solutions to Problems Problem 2: Solution Answers found using Excel formulas: 1. Amount required = \$100,000 Compounding periods = annually Annual interest rate = 10% Effective interest rate = 10% Number of compounding periods = 5 Amount to invest = \$62,092.13 2. Amount required = \$100,000 Compounding periods =
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## This note was uploaded on 06/05/2011 for the course IE 305 taught by Professor Wang during the Spring '08 term at Iowa State.

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Solutions-13 - Chapter 13Solutions to Problems Problem 1:...

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