# Key_ps2 - FINA215 Problem Solving Fall 2009 Solutions to...

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

FINA215 Problem Solving Fall 2009 2-1 Solutions to problems on chapter 2, pp. 57-59 3. a. FV = \$5,000 (FVIF 6%/1, 5(1)) = \$5,000 (1.338226) = \$6,691.13 b. FV = \$5,000 (FVIF 8%/1, 5(1)) = \$5,000 (1.469328) = \$7,346.64 c. FV = \$5,000 (FVIF 10%/1, 5(1)) = \$5,000 (1.610510) = \$8,052.55 d. FV = \$5,000 (FVIF 10%/2, 5(2)) = \$5,000 (1.628895) = \$8,144.47 e. FV = \$5,000 (FVIF 10%/4, 5(4)) = \$5,000 (1.638616) = \$8,193.08 From these answers we see that the future values of a security investment increase as interest rates increase. As rates rose from 6 percent to 8 percent, the (future) value of the security investment rose \$655.51 (from \$6,691.13 to \$7,346.). As interest rates rose from 8 percent to 10 percent, the value of the investment rose \$705.91 (from \$7,346.64 to \$8,052.55). This is because as interest rates increase, a stated amount of funds invested at the beginning of an investment horizon accumulates to a larger amount at the end of the investment horizon. . Also as interest rates increase, the future values of the investment increase at an increasing rate. The rise in

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

Key_ps2 - FINA215 Problem Solving Fall 2009 Solutions to...

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

View Full Document
Ask a homework question - tutors are online