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Chapter 6 Homework

# Chapter 6 Homework - Annuity = R FVF-OA n i =...

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Chapter 6: Accounting and the Time Value of Money Tiffany Watt Homework October 13, 2010 AC 301 – 01   Brief Exercises BE6-2 Itzak Perlman needs \$20,000 in 4 years. What amount must he invest today if his investment earns 12% compounded annually? What amount must he invest if his investment earns 12% annual interest compounded quarterly? a . Present Value = \$20,000 ( PVF 4 , 12% ) = \$20,000 ( 1 / (1+.12) 4 ) = \$20,000 (.63552) = \$12,710.36 b . Present Value = \$20,000 ( PVF 16 , 3% ) = \$20,000 ( 1 / (1+.03) 16 ) = \$20,000 (.62317) = \$12,463.34 BE6-4 Dan Webster will invest \$10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to \$13,400? PV = FV ( PVF n , 5% ) \$10,00 0 = \$13,400 ( PVF n , 5% ) PVF n , 5% = \$10,0 00 = .74627 or Period 6 \$13,4 00

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Chapter 6: Accounting and the Time Value of Money Tiffany Watt Homework October 13, 2010 AC 301 – 01   Exercises E6-3 a . Future Value = PV ( FVF n , i ) = \$7,000 (1.46933) = \$10,285.31 b . Present Value = FV ( PVF n , i ) = \$7,000 (.43393) = \$3,037.51 c . Future Value of an Ordinary
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Unformatted text preview: Annuity = R ( FVF-OA n , i ) = \$7,000 (31.77248) = \$222,407.36 d . Present Value of an Ordinary Annuity = R ( PVF-OA n , i ) = \$7,000 (12.46221) = \$87,235.47 E6-6 a . Future Value = PV ( FVF n , i ) = \$12,000 (1+.10) 10 = \$12,000 (2.59374) = \$31,125 b . Future Value of an Ordinary Annuity = R ( FVF-OA n , i ) = \$600,000 ( (1+.10)15 _ 1 / .10 ) = \$600,000 (31.77248) = \$19,063,489 Chapter 6: Accounting and the Time Value of Money Tiffany Watt Homework October 13, 2010 AC 301 – 01 = \$936,511 Deficiency Based on the calculations, Walters should accept the immediate bonus of \$40,000 instead of the \$70,000 deferred bonus payable in 10 years. Future Value = PV ( FVF n , i ) = \$40,000 ( FVF 10 , 8% ) = \$40,000 (1+.08) 10 = \$40,000 (2.15892) = \$86,357 c . Present Value = FV ( PVF n , i ) = \$70,000 ( PVF 10 , 8% ) = \$70,000 ( 1 / (1+.08) 10 ) = \$70,000 (.46319) = \$32,423...
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