For each of the following cases, indicate (a) to what number of periods and (b) to what interest rate
columns you would refer in looking up the table factor.
Number of Annual
Years Invested Rate Compounded
Future value of 1 table:
Case A 8 6% Annually
= 1.5938 n=8; i=6
Case B 3 8% Semiannually
= 1.2653 n=6; i=4
Future value of an annuity:
Case C 2 12% Monthly
= 26.9735 n=24; i=1
Case D 5 8% Quarterly
= 24.2974 n=20; i=2
Present value of 1:
Case E 1 48% Bimonthly
= 0.6217 n=24; i=2
2 times per month
Present value of an annuity:
Case F 2 18% Monthly
Interpolation using the table factors
:
(21.2434 + 18.9139)/2 = 20.07865 n=24; i=1.5
2. You invested $5,000 at 8% annual interest leaving the money invested without withdrawing any of the
interest. How much would you have at the end of 12 years assuming the investment earns interest
compounded annually?
Future value of amount n=12; i=8 5,000 * 2.5182 = 12,591
3. You borrowed $20,000 on July 1, 2005. This amount plus accrued interest at 12% per year,
compounded quarterly, is to be repaid on July 1, 2010. How much will you have to repay on July 1, 2010?
Future value of amount n=20; i=3 20,000 * 1.8061 = 36,122
4. You agreed to make annual sinking fund deposits (savings account deposits) of $60,000 per year
because you borrowed $800,000 by issuing some bonds. Your deposits are made at the end of each year
into an account paying 5% annual interest. What amount will be in the sinking fund at the end of 10
years? Will you have enough to pay back the bonds?
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 Fall '08
 MENSAH
 Financial Accounting, Time Value Of Money, $1,000, $2,000, BettyJoeBob

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