Chapter 10 Solution

# 70 chapter 10 ordinary annuities future value and

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Unformatted text preview: . If contributions start this year, the amount in the RRSP 30 years from now will be (1 + i ) n − 1 FV = PMT i 30 1.08 − 1 = \$1000 0.08 = \$113,283 If contributions start in the sixth year and continue for 25 years, the RRSP will be worth 1.08 25 − 1 FV = \$1000 0.08 = \$73,106 The RRSP will be worth \$113,283 – \$73,106 = \$40,177 more as a result of the first 5 years’ contributions. 46 Same I/Y P/Y 12 ENTER (making C/Y = P/Y = 12) 60 N 106153.70 + / – PV 300 + / – PMT CPT FV Ans: 188,830.08 8 I/Y P/Y 1 ENTER (making C/Y = P/Y = 1) 30 N 0 PV 1000 + / – PMT CPT FV Ans: 113,283 Same I/Y, P/Y, C/Y, PV, PMT 25 N CPT FV Ans: 73,106 Business Mathematics in Canada, 7/e Exercise 10.2 (continued) 27. If \$3000 is contributed at the end of each year for the next 30 years, (1 + i ) n − 1 FV = PMT i 1.08 30 − 1 = \$3000 0.08 = \$339,850 If \$6000 is contributed at the end of each of the last 15 years, 1.0815 − 1 FV = \$6000 0.08 = \$162,913 The \$3000 contribution for 30 years will result in \$339,850 – \$162,913 = \$176,937 more in the RRSP. (The first plan’s future value is more than twice the second plan’s future value.) 8 I/Y P/Y 1 ENTER (making C/Y = P/Y = 1) 30 N 0 PV 3000 + / – PMT CPT FV Ans: 339,850 Same I/Y, P/Y, C/Y, PV 15 N 6000 + / – PMT CPT FV Ans: 162,913 Chapter 10: Ordinary Annuities: Future Value and Present Value 47 48 Business Mathematics in Canada, 7/e Exercise 10.3 1. Given: j = 8%; m = 1; term = 25 years % i = 81 = 8%; n = 1(25) = 25 1 − ( 1 + i ) − n 1 − 1.08 −25 PV = PMT = PMT 0.08 = 10.6747762 PMT i (a) PMT = \$1000 (b) PMT = \$2000 PV = \$10,674.78 PV = \$21,349.55 8 I/Y P/Y 1 ENTER (making C/Y = P/Y = 1) 25 N 1000 PMT 0 FV CPT PV Ans: –10,674.78 Same I/Y, P/Y, C/Y Same N, FV 2000 PMT CPT PV Ans: –21,349.55 Chapter 10: Ordinary Annuities: Future Value and Present Value (c) PMT = \$3000 PV = \$32,024.33 Same I/Y, P/Y, C/Y Same N, FV 3000 PMT CPT PV Ans: –32,024.33 49 Exercise 10.3 (continued) 3. PMT = \$1000 and n = 20 in all parts. a. For j = 5% compounded annually, 1 − ( 1 +...
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## This document was uploaded on 02/08/2014.

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