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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