Finance Class

Chapter 9; Page 278 #2. Page 279, #5, #10 Page 281, #30.

Chapter 10, Page 310 #2 Page 311 #12.  Page 314 #29

CHAPTER 9)

PAGE 278 , PROBLEM 2:

What is the present value of:

a. $8,000 in 10 years at 6 percent? 8,000x.558=4,464

b. $16,000 in 5 years at 12 percent? 16,000x.567=9,072

c. $25,000 in 15 years at 8 percent? 25,000x.315=7,875

The formula is:

PV = FV × PVIF

TO GET PVIF USE APPENDIX B IN YOUR BOOK

PAGE 279, PROBLEM 5:

If you invest $12,000 today, how much will you have:

a. In 6 years at 7 percent? 12,000x1.501=18,012

b. In 15 years at 12 percent? 12,000 x5.474=65,688

c. In 25 years at 10 percent? 12,000 x10.835=130,020

d. In 25 years at 10 percent (compounded semiannually)? 12,000x11.467=137,609

Remember for d that if it is compounded semiannually you need to divide the percentage rate of return by 2 and multiply the number of years by 2 and solve using that % and that amount of time.

The formula is:

FV = PV × FVIF

TO GET FVIF USE APPENDIX A IN YOUR BOOK

PROBLEM 10:

How much would you have to invest today to receive:

a. $12,000 in 6 years at 12 percent? 12,000x.507=6,084

b. $15,000 in 15 years at 8 percent? 15,000x.315=4,725

c. $5,000 each year for 10 years at 8 percent? 5,000x6.710=33,550

d. $40,000 each year for 40 years at 5 percent? 40,000x17.159=686,360

FOR QUESTIONS A and B use the Formula:

PV = FV × PVIF

TO GET PVIF USE APPENDIX B IN YOUR BOOK

For questions C and D use the Formula:

PV = A (the annuity) × PVIFA

TO GET PVIFA USE APPENDIX D IN YOUR BOOK

PAGE 281, PROBLEM 30:

You need $23,956 at the end of nine years, and your only investment outlet is an 7 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.

a. What single payment could be...