KIN356ProblemSet5

# KIN356ProblemSet5 - b. \$2,000 (2.518) = \$5036 \$24,000...

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Griffin Warner Problem Set V 1) a. \$9,000 (1.195) = \$10,755.00 b. \$9,000 (2.252) = \$27,024.00 2) a. \$15,000 = x (2.159) = \$6,947.66 b. \$60,000 = x (2.358) = \$25,445.29 3) \$175,000/1.993 = \$87, 807.33 4) \$1,000,000/1.965 = \$508,905.85 5) \$25,000 (3.138) = \$78,450.00 6) \$2,500 (1.611) = \$40,275.00 7) \$20,000 (2.252) = \$45,040 Since \$45,040 > \$40,000, Chase Bank should accept the president’s offer to pay off the debt immediately because they would be getting a good return on the money by the time the soccer association would have paid off the debt. 8) a. \$2,000 (2.332) = \$4664 \$24,000 (0.475) = \$11,400 As agent for Kate Incerto, it would be a better idea to receive the \$24,000.00 at the end of eight years because in present value it is a better alternative to the \$10,000 received upfront, and also the \$2,000.00 received per year for eight years.
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Unformatted text preview: b. \$2,000 (2.518) = \$5036 \$24,000 (0.397) = \$9528 It would be better in this situation to take the \$10,000 up front because it would be a better alternative to the \$24,000 received in eight years that would only yield \$9,528, and it would be more than the \$5,036 returned from the \$2,000 per year over eight years. 9) \$60,000 (1.967) = \$118,020/7 years = \$16,860/year in annual payments. In my first payment, I will pay \$118,020 - \$60,000 = 58020/7 = \$8,289 in interest and \$8,571 toward the principal. The second payment will leave me a bit more ahead in interest as I will only be paying \$58020 8289 = 49731/7 = \$7104, but I will pay more in principal (\$9756)to meet my annual payment of \$16,860....
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## This note was uploaded on 06/15/2011 for the course KIN 356 taught by Professor Warner during the Fall '09 term at University of Texas at Austin.

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