Chapter 5 Homework Problems Solutions

Chapter 5 Homework Problems Solutions - Solutions to...

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Unformatted text preview: Solutions to End-of-Chapter 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.) 5-8 from the sixth edition (2-8 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%. 5-12 (2-12) 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 | | +700-749 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 | | +85,000-201,229 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 | | | | | | +9,000-2,684.80-2,684.80-2,684.80-2,684.80-2,684.80 With a financial calculator, enter: N = 5, PV = 9000, PMT = -2684.80, and FV = 0. I/YR = 15%. 5-19 (2-19) 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. 5-21 (2-21) 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 30-year 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.

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Chapter 5 Homework Problems Solutions - Solutions to...

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