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Unformatted text preview: Solutions to EndofChapter Problems (Not: Problem numbers are based on the Concise Sixth Edition of the Text. Problem numbers included in the parentheses are those corresponding to the Fifth Edition.) 58 from the sixth edition (28 from the fifth edition) Using a financial calculator, enter the following: N = 60, I/YR = 1, PV = 20000, and FV = 0. Solve for PMT = $444.89. EAR = M NOM M I 1 + 1.0 = (1.01) 12 1.0 = 12.68%. 512 (212) These problems can all be solved using a financial calculator by entering the known values shown on the time lines and then pressing the I/YR button. a. 1   +700749 With a financial calculator, enter: N = 1, PV = 700, PMT = 0, and FV = 749. I/YR = 7%. b. 1  700 +749 With a financial calculator, enter: N = 1, PV = 700, PMT = 0, and FV = 749. I/YR = 7%. c. 10   +85,000201,229 I/YR = ? I/YR = ? I/YR = ? With a financial calculator, enter: N = 10, PV = 85000, PMT = 0, and FV = 201229. I/YR = 9%. d. 1 2 3 4 5       +9,0002,684.802,684.802,684.802,684.802,684.80 With a financial calculator, enter: N = 5, PV = 9000, PMT = 2684.80, and FV = 0. I/YR = 15%. 519 (219) a. Begin with a time line: 40 41 64 65     5,000 5,000 5,000 Using a financial calculator input the following: N = 25, I/YR = 9, PV = 0, PMT = 5000, and solve for FV = $423,504.48. b. 40 41 69 70     5,000 5,000 5,000 FV = ? Using a financial calculator input the following: N = 30, I/YR = 9, PV = 0, PMT = 5000, and solve for FV = $681,537.69. c. 1. 65 66 67 84 85      423,504.48 PMT PMT PMT PMT Using a financial calculator, input the following: N = 20, I/YR = 9, PV = 423504.48, FV = 0, and solve for PMT = $46,393.42. 2. 70 71 72 84 85      681,537.69 PMT PMT PMT PMT I/YR = ? 9% 9% 9% 9% Using a financial calculator, input the following: N = 15, I/YR = 9, PV = 681537.69, FV = 0, and solve for PMT = $84,550.80. 521 (221) a. If Crissie expects a 7% annual return on her investments: 1 payment 10 payments 30 payments N = 10 N = 30 I/YR = 7 I/YR = 7 PMT = 9500000 PMT = 5500000 FV = 0 FV = 0 PV = $61,000,000 PV = $66,724,025 PV = $68,249,727 Crissie should accept the 30year payment option as it carries the highest present value ($68,249,727)....
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This note was uploaded on 11/11/2011 for the course FIN 350 taught by Professor Chen during the Spring '07 term at S.F. State.
 Spring '07
 Chen
 Finance

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