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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