Solutions Guide: Please do not present as your own
Solutions Guide: Please do not present as your own. I sometimes post solutions that are totally mine, from the book’s solutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else.
Running Head: WEEK 5 TEXT ASSIGNMENTS
Week 5 Text Assignments
Michael T. Ryan
University of Phoenix
FIN 419 – Finance for Decision Making
Dana Williams
July 14, 2010
Week 5 Text Assignments
4.2
Future value calculation
Without referring to tables or to the preprogrammed function on your financial calculator, use the basic formula for future value along with the given interest rate, i, and the number of periods, n, to calculate the future value interest factor in each of the cases shown in the following table. Compare the calculated value to the value in Appendix Table A–1.
|Case |Interest rate, i |Number of periods, n |
|A |12% |2 |
|B |6 |3 |
|C |9 |2 |
|D |3 |4 |
Case
A FVIF12%,2 periods ’ (1 + 0.12)2 ’ 1.254
B FVIF6%,3 periods ’ (1 + 0.06)3 ’ 1.191
C FVIF9%,2 periods ’ (1 + 0.09)2 ’ 1.188
D FVIF3%,4 periods ’ (1 + 0.03)4 ’ 1.126
4.3
Use the future value interest factors in Appendix Table A–1 in each of the cases shown in the table on the facing page to estimate, to the nearest year, how long it would take an initial deposit, assuming no withdrawals,
a. To double.
b. To quadruple.
|Case |Interest rate |
|A |7% |
|B |40 |
|C |20 |
|D |10 |
Case A
(a) 2 ’ 1 ( (1 + 0.07)n (b) 4 ’ 1 ( (1 + 0.07)n
2/1 ’ (1.07)n 4/1 ’ (1.07)n
2 ’ FVIF7%,n 4 ’ FVIF7%,n
10 years< n < 11 years 20 years < n < 21 years
Nearest to 10 years Nearest to 20 years
Case B
(a) 2 ’ 1 ( (1 + 0.40)n (b) 4 ’ (1 + 0.40)n
2 ’ FVIF40%,n 4 ’ FVIF40%,n
2 years < n < 3 years 4 years < n < 5 years
Nearest to 2 years Nearest to 4 years
Case C
(a) 2 ’ 1 ( (1 + 0.20)n (b) 4 ’ (1 + 0.20)n
2 ’ FVIF20%,n 4 ’ FVIF20%,n
3 years < n < 4 years 7 years < n < 8 years
Nearest to 4 years Nearest to 8 years
Case D
(a) 2 ’ 1 ( (1 + 0.10)n (b) 4 ’ (1 + 0.10)n
2 ’ FVIF10%,n 4 ’ FVIF40%,n
7 years < n < 8 years 14 years < n ................
................
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