Intermediate acct chp 6

INTERMEDIATE ACCT CHP 6
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Unformatted text preview: INTERMEDIATE ACCT CHP 6 Exercise 6-1 Future value; single amount [LO2] Determine the future value of the following single amounts (Use Table 1 ) (Round "FV Factor" to 5 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.) : Investe d Amoun t Interest Rate No. of Periods Future Value 1. $ 13,000 5% 9 $ 2. 11,000 8 13 $ 3. 29,000 10 16 $ 4. 59,000 5 12 $ Explanation: 1. FV = $13,000 (1.55133*) = $20,167 *Future value of $1: n = 9, i = 5% (from Table 1) 2. FV = $11,000 (2.71962*) = $29,916 *Future value of $1: n = 13, i = 8% (from Table 1) 3. FV = $29,000 (4.59497*) = $133,254 *Future value of $1: n = 16, i = 10% (from Table 1) 4. FV = $59,000 (1.79586*) = $105,956 *Future value of $1: n = 12, i = 5% (from Table 1) Exercise 6-3 Present value; single amount [LO3] Determine the present value of the following single amounts (Use Table 2 ) (Round "PV Factor" to 5 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response) : Futur e Amo unt Inter est Rate No. of Perio ds Present Value 1. $20,00 7% 10 $ 2. 14,00 8 12 $ 3. 25,00 12 20 $ 4. 40,00 10 8 $ Explanation: 1. PV = $20,000 (.50835*) = $10,167 *Present value of $1: n = 10, i = 7% (from Table 2) 2. PV = $14,000 (.39711*) = $5,560 *Present value of $1: n = 12, i = 8% (from Table 2) 3. PV = $25,000 (.10367*) = $2,592 *Present value of $1: n = 20, i = 12% (from Table 2) 4. PV = $40,000 (.46651*) = $18,660 *Present value of $1: n = 8, i = 10% (from Table 2) Exercise 6-10 Future value; solving for annuities and single amount [LO4, 8] John Rider wants to accumulate $100,000 to be used for his daughters college education. He would like to have the amount available on December 31, 2016. Assume that the funds will accumulate in a certificate of deposit paying 8% interest compounded annually. Answer each of the following independent questions. Required: (1 ) If John were to deposit a single amount, how much would he have to invest on December 31, 2011? (Use Table 2 ) (Round "PV Factor" to 5 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) PV $ (2 ) If John were to make five equal deposits on each December 31, beginning on December 31, 2012, what is the required deposit? (Use Table 3 ) (Round "FV Factor" to 4 decimal places and final answer to the nearest dollar amount.Omit the "$" sign in your response.) Annuity amount $ (3 ) If John were to make five equal deposits on each December 31, beginning on December 31, 2011, what is the required deposit? (Use Table 5 ) (Round "FV Factor" to 4 decimal places and final answer to the nearest dollar amount.Omit the "$" sign in your response.) Annuity amount $ Explanation: (1) PV = $100,000 (.68058*) = $68,058 *Present value of $1: n = 5, i = 8% (from Table 2) (2) Annuity amount = $100,000 5.8666* *Future value of an ordinary annuity of $1: n = 5, i = 8% (from Table 3) Annuity amount = $17,046 (3) Annuity ...
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