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Ch_06_Inclass_Exercise_Solutions

# Ch_06_Inclass_Exercise_Solutions - Ch 06 Inclass Exercise...

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1 Ch 06 Inclass Exercise Solutions 1. Suppose you plan to deposit \$600 today, 800 at the end of this year, then 400 the following year and finally 1,000 in year 3. If you can earn 5%, what is this stream of payments worth today? (2,588.55) PV of Uneven Multiple CFs 0 600 1 800 2 400 3 1,000 4 0 5 0 Rate 5.00% PV 2,588.55 2. Suppose you plan to deposit 400 today, 500 at the end of this year, then 600 the following year, then 700 in the third year and finally 800 in year 4. If you can earn 4%, what is the value of this stream of cash flows at the end of year 4? FVof Uneven Multiple CFs 0 400 1 500 2 600 3 700 4 800 5 0 Rate 4.00% PV-step 1 2,741.64 Periods 4 FV-step 2 3,207.34 3. After carefully going over your budget, you have determined you can afford to pay \$632 per month towards a new sports car. You call up your local bank and find out that the going rate is 1 percent per month for 48 months. How much can you borrow? Hint: You borrow money TODAY so you need to compute the present value. (23,999.54) Present Value PMT 632.00 t (N) Periods 48 r (I/Y) Rate 1.00% PV 23,999.54 4. Suppose you want to borrow \$20,000 for a new car. You can borrow at 8% per year, compounded monthly (.08/12 = .66667% per month). If you take a 4-year loan, what is your monthly payment? (488.26) Payment from PV PV 20,000.00 t (N) Periods 48 r (I/Y) Rate 0.67% PMT 488.26

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