Ch 5 Problems

Ch 5 Problems - Solve for I = 22.5% 4.37 Practice Questions...

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Comprehensive Problem • You have $10,000 to invest for five years. How much additional interest will you earn if the investment provides a 5% annual return, when compared to a 4.5% annual return? How long will it take your $10,000 to double in value if it earns 50/0 annually? What annual rate has been earned if $1,000 grows into $4,000 in 20 years? 5C-36 N=5 PV = -10,000 At IIY = 5, the FV = 12,762.82 At IIY = 4.5, the FV = 12,461.82 The difference is attributable to interest. That difference is 12,762.82- 12,461.82 = 301 To double the 10,000: I1Y= 5 PV = -10,000 FV =20,000 CPT N = 14.2 years Note, the rule of72 indicates 72/5 = 14 years, approximately. N=20 PV = -1,000 FV =4,000 CPT IIY = 7.18% 4.36
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Practice Questions Year Return 2009 $50 2010 $60 2011 $75 What are the yearly returns from this investment? What is the compounded annual return from 2009-2011? Yearly returns: 2009-2010: (60-50)/50 = .2 2010-2011: (75-60)/60 = .25 Compound annual return: PV = -50 FV=75 N=2 PMT=O
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Unformatted text preview: Solve for I = 22.5% 4.37 Practice Questions A saver places $1,000 in a certificate of deposit that matures after 10 years and pays 70/0 interest, which is compounded annually until the certificate matures. How much interest will the saver earn if the interest is left to accumulate? N=lO PV = -1000 1= 7 PMT=O Solve for FV = 1,967 4.38 Practice Questions If a person currently earns $10,000 and inflation continues at 4% for 10 years, how much must the person ma ke to maintain purchasing power? N= 10 PV = -10000 PMT=O 1=4 Solve for FV = 14802 4.39 Practice Questions The Redskins have 30,000 spectators per game and anticipate annual growth in attendance of 90/0. If their stadium holds 65,000 people, how long will it take to fill up the stadium? PV = -30000 FV = 65000 1=9 PMT=O Solve for N = 8.97 years 4.40 Practice Questions You want your salary to double in 6 years. At what annual rate of growth must your salary increase to achieve your goal? N=6 PV=-l FV=2 PMT=O Solve for I = 12.24% 4.41...
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Ch 5 Problems - Solve for I = 22.5% 4.37 Practice Questions...

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