Chapter_5_Mini_Case_7th_Ed_

# Chapter_5_Mini_Case_7th_Ed_ - Chapter 5 Problems FV...

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Chapter 5 Problems- FV Example (Page 148) Invest \$500 in bank at 8%, compounded annually. How much wi FV ? N 7 Pmt. 0 I 8% PV \$500 Calculator N = 7 I = 8.00% Pmt. = 0 PV = -\$500.00 FV = \$856.91 Math FV = PV x (1 + I)^n FV = 500 x (1 + .08)^ 7 FV = 500 x1.714 FV = \$856.91 Table (page 563) Go across to 8% Go down to 7 periods Factor is 1.714 Multiply \$500 by 1.714 FV = \$857

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Example To what amount will the following investments accumulate? a. \$5,000 invested for 10 years at 10% compounded annually (p.a. b. \$8,000 invested for 7 years at 8% compounded annually (p.a.) c. \$775 invested for 12 years at 12% compounded annually (p.a.) a. b. c. FV ? ? ? N 10 7 12 Pmt. 0 0 0 I 10% 8% 12% PV \$5,000 \$6,000 \$775 a. Calculator N = 10 I = 10.00% Pmt. = 0 PV = -\$5,000.00 FV = \$12,968.71 Math FV = PV x (1 + I)^n FV = 5,000 x (1 + .1)^ 10 FV = 5,000 x 2.594 FV = \$12,968.71 Table (page 563) Go across to 10% Go down to 10 periods Factor is 2.594 Multiply \$5,000 by 2.594 FV = \$12,970 b. Calculator N = 7 I = 8.00%
Pmt. = 0 PV = -\$6,000.00 FV = \$10,282.95 Math FV = PV x (1 + I)^n FV = 6,000 x (1 + .08)^ 7 FV = 6,000 x 1.714 FV = \$10,282.95 Table (page 563) Go across to 8% Go down to 7 periods Factor is 1.714 Multiply \$6,000 by 1.714 FV = \$10,284 c. Calculator N = 12 I = 12.00% Pmt. = 0 PV = -\$775.00 FV = \$3,019.38 Math FV = PV x (1 + I)^n FV = 775 x (1 + .12)^ 12 FV = 775 x 3.896 FV = \$3,019.38 Table (page 563) Go across to 12% Go down to 12 periods Factor is 3.896 Multiply \$775 by 3.896 FV = \$13,014.40 Example

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How many years will the following take? a. \$500 to grow to \$1,039.50 if invested at 5% p.a. b. \$35 to grow to \$53.87 if invested at 9% p.a. c. \$100 to grow to \$289.60 if invested at 20% p.a. a. b. c. FV \$1,039.50 \$53.50 \$298.60 Pmt. 0 53.5 0 I 5% 9% 20% PV \$500 \$35 \$100 N ? ? ? a. Calculator I = 5.00% Pmt. = 0 PV = -\$500.00 FV = \$1,039.50 N = 15 Math Difficult Table (page 563) Divide 1,040 by 500. This is 2.080. (The factor) Go across to 5% Go down until factor is 2.080 Number of years (periods) is 15 b. Calculator I = 9.00% Pmt. = 0 PV = -\$35.00 FV = \$53.50 N = 5 Math Difficult Table (page 563) Divide 53.50 by 35.00. This is 1.529. (The factor) Go across to 9% Go down until factor is 1.529.
Number of years (periods) is 5. c. Calculator I = 20.00% Pmt. = 0 PV = -\$100.00 FV = \$298.60 N = 6 Math Difficult Table (page 563) Divide 289.60 by 100.00. This is 2.986. (The factor) Go across to 20% Go down until factor is 2.986. Number of years (periods) is 6. Example You have \$1,000 to invest in a savings account. How much money will you have accumulated after 5 years if the interest rate is 6%, compounded: a. annually b. monthly c. daily

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a. Calculator N = 5 I = 6.00% Pmt. = 0 PV = -\$1,000.00 FV = \$1,338.23 Math FV = PV x (1 + I)^n FV = 1,000 x (1 + .06)^ 5 FV = 1,000 x 1.338 FV = \$1,338.23 Table (page 563) Go across to 6% Go down to 5 periods Factor is 1.338 Multiply \$1,000 by 1.338 FV = \$1,338 b. Calculator N = 60 5 years x 12 months I = 0.50% 6%/12 months Pmt. = 0 PV = -\$1,000.00 FV = \$1,348.85 Math FV = PV x (1 + I)^n FV = 1,000 x (1 + .005)^ 60 FV = 1,000 x 1.34885 FV = \$1,348.50 Table (page 563) Can not use. c. Calculator N = 1825 5 years x 365 days I = 0.0164% 6%/365 days Pmt. = 0 PV = -\$1,000.00 FV = \$1,349.83 Math
FV = PV x (1 + I)^n FV = 1,000 x (1 + .000164)^1825 FV = 1,000 x 1.34888 FV = \$1,348.88 Table (page 563) Can not use.

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ill it be worth in 7 years?
.)

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Chapter 5 Problems- PV Example What is the present value of the following future amounts? a. \$800 to be received 10 years from now and discounted back to the present a b. \$300 to be received 5 years from now and discounted back to the present at c. \$1,000 to be received 8 years from now and discounted back to the present d. \$1,000 to be received 8 years from now and discounted back to the present

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a. b. c. d.
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