Solutions Time Value

Solutions Time Value - Solutions to Time Value Problems...

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Solutions to Time Value Problems There is some notation that I want to point out. Rather than write out the formula for an annuity the book, and I, will use some shorthand notation. A t r% = + - t r r r ) 1 ( 1 1 is the present value of a \$1 annuity discounted at rate r over t years. If you want to know the present value of \$C to be delivered over t years at an interest rate r you just take the annuity factor, A t r% , and multiply it by \$C. 1. \$70,000 = \$C x A 10 15% ;\$C = \$13,947.56 2. Solve the following for t: \$1,500x A t 9% = \$12,000. If you use the tables at the back of the book you get t 15 years. If you use a calculator or Excel, t = 14.77 years. Use Excel NPER function. 3. Solve the following for r: \$8,273.59 x A 30 r% = \$85,000. If you use the tables you get r = 9%. You should get the same thing with a calculator or Excel. Use Excel RATE function. 4. Draw a time line it will be helpful. C = \$180.19. 5. Solve the following for r: \$10M x A 10 r% = \$50M. If you use the tables you get r 15% (r = 15.10%). You should get the same thing with a calculator or Excel. Use Excel RATE function.

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• Fall '12
• Bizjak

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