8
Compound Interest: Future
Value and Present Value
Exercise 8.1
j
6%
=
= 0.5% per month
m
12
j
6%
i=
=
= 1.5% per quarter
m
4
j
6%
i=
=
= 3.0% per half-year
m
2
j
5.4%
i=
=
= 1.35% per quarter
m
4
j
5.4%
i=
=
= 0.45% per month
m
12
j = mi = 2(3.6%) = 7.2
11
Ordinary Annuities:
Periodic Payment, Number of
Payments, and Interest Rate
Exercise 11.1
1. Given: FV = $500,000; j = 9%; m = 1.
Then i = 9%
a. For a term of 25 years, n = 25.
Solve for PMT in
1.09 25 1
$500,000 = PMT
0.09
PMT = $5903.13
Earnings
SOLUTIONS TO END-OF-CHAPTER PROBLEMS
Chapter 2
Financial Statements, Cash Flow, and Taxes
2-1
2-2
Corporate yield = 9%; T = 35%
AT yield = 9%(1 - T)
= 9%(0.65) = 5.85%.
NI = $3,000,000; EBIT = $6,000,000; T = 40%; Interest = ?
Need to set up an income sta