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PVMathQuiz_fa2010_solutions

# PVMathQuiz_fa2010_solutions - Present Value Math Quiz...

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Present Value Math Quiz Solutions (Fall 2010) 1. What nominal rate of return is represented by a 25% effective annual rate with weekly compounding? In the HP 17BII+: FIN ICNV PER 25 EFF 52 P NOM Using the formula: [1.25^(1/52)-1]*52 Ans: 22.36%, so the correct choice is (a) 2. Five years from now, you plan to make major capital improvements to your property that will cost \$200,000 (at that time). How much must you contribute to an account at the end of each quarter to meet your fundraising goal if your expected nominal rate of return is 7% per year? PV = 0 FV = 200000 N = 20 I = 7% P/YR = 4 END mode PMT = -8438.24 So the correct choice is (c) 3. When you purchased your car, you received a loan of \$15,000 at a 4% interest rate. If you make monthly payments of \$400, how many months will it take to pay down (at least) one-third of the balance? [Hint: Be very careful with the amount and sign for FV. Draw a timeline for borrower and lender with cash flow arrows if you’re unsure] PV = 15000 FV= -10000 I = 4% PMT = -400 P/YR = 12 END mode N = 13.98 So the correct choice is (b) 4. If the value of your home doubled in 7 years, what was the annual rate of appreciation (compounded annually)? PV = -1 FV = 2 N = 7% PMT = 0 P/YR = 1 I = 10.41% So the correct choice is (d)

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5. What is the outstanding balance after 5 years on a \$75,000 loan at 6% nominal annual interest with full amortization in 15 years?
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PVMathQuiz_fa2010_solutions - Present Value Math Quiz...

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