Ch 5 Web Appendix 5A Solutions

Ch 5 Web Appendix 5A Solutions - 0.095 – 1.0 = 0.0997 =...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Web Appendix 5A Continuous Compounding and Discounting Solutions to Problems 5A-1 FV 15  = $15,000e 0.06(15)  = $36,894.05. 5A-2 PV = FV N /e IN  = $200,000/e 0.09(7)  = $200,000/1.8776= $106,518.36. 5A-3 Daily compounding: FV 2  = PV(1 + 0.07/365) 365(2)  = $1,000(1.15026) = $1,150.26 Continuous compounding: FV 2  = PVe IN  = $1,000e 0.069(2)  = $1,000(1.14798) = $1,147.98 Difference between accounts $               2.28     5A-4 Calculate the growth factor using PV and FV which are given: FV N = PVe IN ; $40,000 = $20,000e I6 e I6 = 2.0. Take the natural logarithm of both sides: I(6)ln e = ln 2.00. The natural log of e = 1.0. Inputs:  2.0.  Press LN key.  Output:  LN = 0.6931. I(6)ln e = ln 2.0 I(6) = 0.6931 I = 0.1155 = 11.55%. 5A-5 Determine the effective annual rates. a. 10.25% annually = 10.25%. Appendix 5A  Continuous Compounding and Discounting Answers and Solutions 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
b. 10.0% semiannually =  2 2 10 . 0 1 +  – 1.0 = 0.1025 = 10.25%. c. 9.5% continuously = e
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 0.095 – 1.0 = 0.0997 = 9.97%. 5A-6 (Constant e = 2.7183 rounded.) $11,572.28 = PVe 0.09(15) $11,572.28 = PVe 1.35 PV = $11,572.28/e 1.35 = $11,572.28/3.85743 = $3,000. 5A-7 e (0.03)(10) = 20 NOM 2 I 1 + e 0.3 = 20 NOM 2 I 1 + e 0.3/20 = 1 + 2 I NOM 1.01511= 1 + 2 I NOM 2 I NOM = 0.01511 I NOM = 0.0302 = 3.02%. 5A-8 Step 1: Calculate the FV of the $2,000 deposit at 8% with continuous compounding: Using e x key: Inputs: X = 0.24; press e x key. Output: e x = 1.27125. FV N = $2,000e 0.08(3) = $2,000(1.27125) = $2,542.50. Step 2: Calculate the PV or initial deposit: Input the following data into your calculator: N = 6; I/YR = 4.5; PMT = 0; FV = 2542.50; and then solve for PV = $1,952.37. 2 Answers and Solutions Appendix 5A Continuous Compounding and Discounting...
View Full Document

This note was uploaded on 01/11/2012 for the course FIN 3403 taught by Professor Tapley during the Fall '06 term at University of Florida.

Page1 / 2

Ch 5 Web Appendix 5A Solutions - 0.095 – 1.0 = 0.0997 =...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online