Written Assignment #1

# Written Assignment #1 - question If so please explain how...

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Dustin Taylor FIN-301 June 2011 Term Written Assignment #1 Problem #1 a. \$629.00 [(\$1,000 x 1.629) - \$1,000] b. \$500.00 [(\$1,000 x 5%) x 10 yrs.] c. In scenario A, the interest earned also earns interest in the following years. Over the span of 10 years, that amount adds up to an additional \$129.00 of interest. Problem #2 a. PV = \$3,000 x [1- (1.08) 25 - ] /.08 = \$32,024.33 FV = \$32,024.33 x (1.08) 25 = \$219,317.82 b. PV = \$3,000 [1- (1.08) 30 - ] / .08 = \$33,773.35 FV = \$33,773.35 x (1.08) 30 = \$339,849.63 - \$219,317.82 = \$120,531.81 c. \$219,317.82 x (1.08) 5 = \$322,249.83 - \$219,317.82 = \$102,932.01 * The book gives an answer of \$17,671.00 for part C. I don’t think it’s correct. 5 years of interest at 8% on over \$200,000 doesn’t come to \$17,671.00. I may be misunderstanding the

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Unformatted text preview: question. If so, please explain how the correct answer was obtained. Problem #3 PV = \$2,000 x [1- (1.09) 20-] / .09 = \$18,257.09 FV = \$18,257.09 x (1.09) 20 = \$102,320.24 accumulated Payment = \$102,320.24 / [1- (1.09) 20-/ .09] = \$11,208.80 annual payment Problem #5 PV of annuity = \$100,000 / (1.09) 18 = \$21,199.37 Annual investment = \$21,199.37 / 8.756 = \$2,421.12 Problem #6 \$93,000 / [1- (1.09) 10-/ .09] = \$14,491.27 No. She can only withdraw \$14,491.27 a year for the next 10 years. Problem #7 PV = \$10,000 x [1- (1.10) 25-] / .10 = \$90,770.40 Don’t buy it. The present value is about \$30,000 than its selling price. Problem #12 \$65,000 (1+ i ) 5 = \$100,000 i ≈ 9% Problem #13 \$33,520 = \$10,000 x [1- (1+ i ) 5-] / i i ≈ 15%...
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## This note was uploaded on 07/13/2011 for the course FIN 301 taught by Professor Crisonino during the Spring '11 term at Edison State College.

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Written Assignment #1 - question If so please explain how...

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