MATH1175 Unit 4 Review Solutions[1]

# MATH1175 Unit 4 Review Solutions[1] - MATH1175 UNIT 4...

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Unformatted text preview: MATH1175 UNIT 4 REVIEW 1. A city borrows \$2,000,000 to build a sewage treatment plant. The debt requires interest at j 2 = 14%. At the same time a sinking fund earning interest at j 2 = 10% is established in order to repay the loan in 20 years. Find a) the semi-annual expense of the debt. loan interest payment = 2,000,000 (0.14 2) = 140,000 N = 2 20 = 40, I/Y = 10, P/Y=C/Y = 2, PV = 0, FV = 2,000,000 CPT PMT = 16,556.32 **re-enter** Semi-annual expense = 140,000 + 16,556.32 = \$156,556.32 b) the book value of the debt at the beginning of the 16th year. P1 = P2 = 30 BAL = 1,099,982.82 Book Value = 2,000,000 1,099,982.82 = \$900,017.18 c) Construct the S.F. schedule for the first 2 years. Payment Number Payment Interest Increase Balance Book Value 0 - - - 0 2,000,000 1 16,556.32 0 16,556.32 16,556.32 1,983,443.68 2 16,556.32 827.82 17,384.14 33,940.46 1,966,059.54 3 16,556.32 1,697.02 18,253.34 52,193.80 1,947,806.20 4 16,556.32 2,609.69 19,166.01 71,359.81 1,928,640.19 d) Construct the S.F. schedule for the last 2 years with totals....
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## This note was uploaded on 10/04/2011 for the course MATH 1175 taught by Professor Jenny during the Spring '10 term at Fanshawe.

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MATH1175 Unit 4 Review Solutions[1] - MATH1175 UNIT 4...

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