Answers to Homework-Ch6toCh10-F08 - Answers to Assigned...

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Answers to Assigned Homework…………….Ch 6 thru Ch 10 FALL, 2008 Ch 6 6-1 C = $15 + $15 (A/G, 10%, 4) = $15 + $15 (1.381) = $35.72 6-5 A = $100 (A/P, 3.5%, 3) = $100 (0.3569) = $35.69 6-7 F = A (F/A, 1.25%, 480) (F/P, 1.25%, 20) + A (F/A, 1.25%, 20) = A [(31,017) (1.282) + 22.6] = A (39,786) A = $1,000,000/39,786 = $25.13 6-8 A = F[(e r −1)/(e m − 1)] = $5 × 10 6 [(e 0.15 − 1)/(e (0.15)(40) − 1)] = $5 × 10 6 [0.161834/402.42879] = $2,011 6-10 $500 = D (F/A, 12%, 3) + 0.5D + D (P/A, 12%, 2) = D (3.374 + 0.5 + 1.690) D = $500/5.564 = $89.86 6-26 Alternative A EUAC = A = [$2,000 + $500 (P/F, 12%, 1)] (A/P, 12%, 5) = [$2,000 + $500 (0.8929)] (0.2774) = $678.65 Alternative B EUAC = A = $3,000 (F/P, 12%, 1) (A/F, 12%, 5) = $3,000 (1.120) (0.1574) = $528.86 To minimize EUAC, select B. ===================================================
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Ch 7 7-1 $100 = $27 (P/A, i%, 10) (P/A, i%, 10) = 3.704 Performing Linear Interpolation: ( P/A, i%, 10) I 4.192 20% 3.571 25% Rate of Return = 20% + (5%) [(4.192 − 3.704)/(4.912 − 3.571)] = 23.9% 7-2 (a) F = $5, P = $1, n = 5 F = P (1 + i) n $5 = $1 (1 + i) 5 (1 + i) = 5 0.20 = 1.38 i * = 38% (b) For a 100% annual rate of return F = $1 (1 + 1.0) 5 = $32, not $5! Note that the prices diagonal charges do not necessarily reflect what anyone will pay a collector for his/her stamps. 7-4 The rate of return exceeds 60% so the interest tables are not useful. F = P (1 + i) n $25,000 = $5,000 (1 + i) 3 (1 + i) = ($25,000/$5,000) 1/3 = 1.71 i * = 0.71 Rate of Return = 71% 7-6 1991 − 1626 = 365 years = n F = P (1 + i) n 12 × 10 9 = 24(1 + i) 365 (1 + i) 365 = 12 x 10 0 /24 = 5.00 × 10 8 This may be immediately solved on most hand calculators: i * = 5.64% Solution based on compound interest tables: (F/P, i%, 365) = 5.00 × 10 8 = (F/P, i%, 100) (F/P, i%, 100) (F/P, i%, 100) (F/P, i%, 65) Try i = 6% (F/P, 6%, 365) = (339.3) 3 (44.14) = 17.24 × 10 8 (i too high) Try i = 5% (F/P, 5%, 365) = (131.5) 3 (23.84) = 0.542 × 10 8 (i too low) Performing linear interpolation: i * = 5% + (1%) [((5 − 0.54) (10 8 ))/((17.24 − 0.54) (10 8 ))] = 5% + 4.46/16.70 = 5.27% The linear interpolation is inaccurate.
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7-10 3,000 = 30 (P/A, i * , 120) (P/A, i * , 120) = 3,000/30 = 100 Performing Linear Interpolation: ( P/A, i%, 120) I 103.563 ¼%
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This note was uploaded on 09/11/2011 for the course ECON 201 - ECON 201 - taught by Professor Charlesc.chiemeke during the Spring '09 term at American University of Kuwait.

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Answers to Homework-Ch6toCh10-F08 - Answers to Assigned...

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