TVMHW - M-1 Simple and Compound Interest 1. (a) $60,000 x...

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M-1 Simple and Compound Interest 1. (a) $60,000 x 12%= $7200 interest Total to be repiad in 12 mths $67,200 (b) Interst payment $7200 (c) $67200 +$3600=$70800 2. $67200 + $4032 =$71232 3. 2 is more because the interest for the second half year is compounded using the principal + first year interest, 1(c) uses principal only to determine interest. M-2 Reciprocal Relationships: Future and Present Value 1. FV= $10050(1 + .10) 6 = $17804 2. FV= $650(1 + .03) 40 = $2120 3. FV= $5000(1+.16) 4 = $9053 then $9053(1+.08) 8 = $16756 4. FV= $1000(1+.04) 10 = $1480 then $1480+$1000=$2480(1+.03) 12 = $3536 M-3 Reciprocal Relationships: Future and Present Value 1. PV= $ 9412.50 2. PV= $ 3377.82 3. PV= $ 3150.75 4. PV= $ 3953.55 M-4 Choosing Between Alternative methods $10000(1+.10) 4 = $14641 $10000(1+.02) 16 = $13727.86 Because of these calculations, Heather Company should take option one. M-6 Unknown Investment Periods 1. $5051 at 10% per annum, compounded semiannually = 14 periods or 7 yrs 2. $5002 at
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TVMHW - M-1 Simple and Compound Interest 1. (a) $60,000 x...

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