to invest today at 7% interest compounded annually. a. How much will you have accumulated in the account at the end of the following number of years? 1. 3 years -$1‚500 PV 3 N 7 I/P CPT FV=$1‚837.56 2. 6 years -$1‚500 PV 6 N 7 I/P CPT FV=$2‚251.10 3. 9 years -$1‚500 PV 9 N 7 I/P CPT FV=$2‚757.69 4. b. Use your findings in part (a) to calculate the amount of interest earned in 1. Year 1
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ALL QUESTIONS ( 5 MARKS EACH ) 1.1 A discount store sold plastic cups for $0.35 each and plastic plates for $0.40 each. If 200 plastic cups and plates were sold for a total of $76‚ how many cups and plates were sold? 1.2 Find the exact interest on a loan of $2000 at 11% annually. The loan was made on February 15 and was due on 25 August in a non-leap year. 1.3 A sofa set was purchased with $500 down payment and 24 payments of $125. i. ii. Find the installment price of the sofa set
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= $60‚422.02 Time Value of Money- TVM Future Value FV=PV*(1+i)^n FV= future value PV= present value i= interest rate n= time The Rule of 72 If at 10%‚ it will take 7.2 to double (just divide 72 by 10) 72 DIVIDED BY ANY NUMBER is how long it will take to double Present value PV=FV/(1+i)^n FV= future value PV= present value i= interest rate n= time Annuity= an individual present/future value IRA (10% compounding) Investor A- Age 16 invests $2‚000
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(future) value (S) when $70‚000 is invested at 2.04% pa simple interest for 380 days. Give your answer in dollars and cents to the nearest cent. S = $ [1 out of 1]- Feedback Your answer is within an acceptable range of the correct answer and you have received full marks. Calculation The accumulated value can be calculated using the following formula: show variables P = amount invested = $70‚000 r = simple interest rate (decimal) = 2.04% = 0.0204 t = time period (years) =
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CHAPTER 6 Discounted Cash Flow Valuation 187 CONCEPT QUESTIONS 6.4a What is a pure discount loan? An interest-only loan? 6.4b What does it mean to amortize a loan? 6.4c What is a balloon payment? How do you determine its value? SUMMARY AND CONCLUSIONS This chapter rounds out your understanding of fundamental concepts related to the time value of money and discounted cash flow valuation. Several important topics were covered‚ including: 1. There are two ways of calculating present and
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Chapter 5 Which of the following is the actual rate of interest paid or earned over a year’s time? Wrong Answer: the periodic rate Which of the following has the highest time value of money at the same time interest rate for the same number of payments Correct Answer: the future value or an annuity-due Which of the following would increase the present value of a single cash flow? Wrong Answer: a decrease in the cash flow You invest $1000 at 6% compounded annually and want to know
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objectives? Assume interest remains at 9%. [$1254] 2. You can deposit $4000 per year into an account that pays 12% interest. If you deposit such amounts for 15 years and start drawing money out of the account in equal annual installments‚ how much could you draw out each year for 20 years? [$19964.12] 3. What is the value of a $100 perpetuity if interest is 7%? [$1428.57] 4. You deposit $13‚000 at the beginning of every year for 10 years. If interest is being paid
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E. consol 4. The interest rate that is quoted by a lender is referred to as which one of the following? A. stated interest rate B. compound rate C. effective annual rate D. simple rate E. common rate 5. A monthly interest rate expressed as an annual rate would be an example of which one of the following rates? A. stated rate B. discounted annual rate C. effective annual rate D. periodic monthly rate E. consolidated monthly rate 6. What is the interest rate charged per period
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costing and lease-buy analysis. Course Outline I. Time Value of Money ....................................................................................4 A. Present Value and Future Value 1. Discrete Compounding 2. Compound Interest Tables 3. Continuous Compounding 4. Effective Annual Rate 5. Calculations Involving Fractional Years B. Annuities 1. Ordinary Annuities (Annuities in Arrears) 2. Annuities Due
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G K Powers CAMBRIDGE UNIVERSITY PRESS Cambridge‚ New York‚ Melbourne‚ Madrid‚ Cape Town‚ Singapore‚ São Paulo‚ Delhi‚ Dubai‚ Tokyo‚ Mexico City Cambridge University Press 477 Williamstown Road‚ Port Melbourne‚ VIC 3207‚ Australia www.cambridge.edu.au Information on this title: www.cambridge.org/9780521138345 © The Powers Family Trust 2010 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements‚ no reproduction of any
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