Chapter5SelectedQuestionsandProblemsWeek5Fin324
SeventhEdition
Questions:
52
True.Thesecondseriesisanunevencashflowstream,butitcontainsanannuityof$400...
Chapter5SelectedQuestionsandProblemsWeek5Fin324
SeventhEdition
Questions:
52
True.Thesecondseriesisanunevencashflowstream,butitcontainsanannuityof$400
for8years.Theseriescouldalsobethoughtofasa$100annuityfor10yearsplusan
additionalpaymentof$100inYear2,plusadditionalpaymentsof$300inYears3through
10.
54
Forthesamestatedrate,dailycompoundingisbest.Youwouldearnmoreintereston
interest.
Problems:
51
0
1


PV=10,000
2

3

4

5

FV5=?
FV5 =$10,000(1.10)5
=$10,000(1.61051)=$16,105.10.
Alternatively,withafinancialcalculatorenterthefollowing:N=5,I/YR=10,PV=10000,
andPMT=0.SolveforFV=$16,105.10.
53
0

PV=250,000
18

FV18=1,000,000
Withafinancialcalculatorenterthefollowing:N=18,PV=250000,PMT=0,andFV=
1000000.SolveforI/YR=8.01%8%.
55
0
1


PV=42,180.53 5,000
2
N2


5,000
5,000
N1

5,000
N

FV=250,000
Usingyourfinancialcalculator,enterthefollowingdata:I/YR=12;PV=42180.53;PMT=
5000;FV=250000;N=?SolveforN=11.Itwilltake11yearstoaccumulate$250,000.
59
a.
0

1

$500(1.06)=$530.00.
500
FV=?
Usingafinancialcalculator,enterN=1,I/YR=6,PV=500,PMT=0,andFV=?
SolveforFV=$530.00.
b.
0

500
1

2

$500(1.06)2=$561.80.
FV=?
Usingafinancialcalculator,enterN=2,I/YR=6,PV=500,PMT=0,andFV=?
SolveforFV=$561.80.
c.
0

PV=?
1

500
$500(1/1.06)=$471.70.
Usingafinancialcalculator,enterN=1,I/YR=6,PMT=0,andFV=500,andPV=?
SolveforPV=$471.70.
d.
0

PV=?
1

2

$500(1/1.06)2=$445.00.
500
Usingafinancialcalculator,enterN=2,I/YR=6,PMT=0,FV=500,andPV=?
SolveforPV=$445.00.
511
a. 2005

6
2006

2007

20082009 2010



12(inmillions)
Withacalculator,enterN=5,PV=6,PMT=0,FV=12,andthensolveforI/YR=
14.87%.
b. Thecalculationdescribedinthequotationfailstoconsiderthecompoundingeffectof
interest.Itcanbedemonstratedtobeincorrectasfollows:
$6,000,000(1.20)5=$6,000,000(2.48832)=$14,929,920,
whichisgreaterthan$12million.Thus,theannualgrowthrateislessthan20%;infact,
itisabout15%,asshowninParta.
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