Assignment Ch 8
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Solution to Assignment - Chapter 8 8-10. $1,000 X (1 + k)5 = $773.78 (1 + k)5 = $773.78/$1,000 (1 + k)5 = .77378 1+k = .95 k = -.05 = -5% 8-19. 1,000 = 2653.3 X [PVIF5%, ?]; 0.3769 = PVIF5%,?; ? = 20 semi-annual periods, so it will take 10 years. 8-22.
a ) $300 X [((1+.02)120 - 1)/.02] = $146,477
b ) $146,477 = $6,000 X [PVIFA2%, n quarters ] PVIFA2%, n quarters = 24.4128; n = 34 quarters or 8.5 years 8-25.
FV = $500 X e.05 x 23 = $1,579.10
8-28. $14,568.50 = $5,000 X [PVIFAk%,4 years], assuming payments start one year from the date of borrowing [PVIFAk%,4 years] = 2.9137; k = 14% 8-30. Option 1) PV = $5,650 Option 2) PV = $6,750 X [1/1.028] = $5,761.06 Option 3) PV = $800 X [(1-(1/(1+.02)8)/.02] = $5,860.39 Option 4) PV = $1,000 + $5,250 X (1/(1+.02)8) = $5,480.82 Option 4) is the one with lowest cost to Jack.
8-32.
a) n = 4 X 12 = 48 k = .06/12 =0 .005 or 0.5% $18,000 = PMT X [(1-1/1.00548)/0.005] PMT = $18,000/42.58031778 = $422.73
b) n = 6 X 12 = 72 k = .06/12 =0 .005 or 0.5% $18,000 = PMT X [(1-1/1.00572)/0.005] PMT = $18,000/60.33951394 = $298.31
a ) $300 X [((1+.02)120 - 1)/.02] = $146,477
b ) $146,477 = $6,000 X [PVIFA2%, n quarters ] PVIFA2%, n quarters = 24.4128; n = 34 quarters or 8.5 years 8-25.
FV = $500 X e.05 x 23 = $1,579.10
8-28. $14,568.50 = $5,000 X [PVIFAk%,4 years], assuming payments start one year from the date of borrowing [PVIFAk%,4 years] = 2.9137; k = 14% 8-30. Option 1) PV = $5,650 Option 2) PV = $6,750 X [1/1.028] = $5,761.06 Option 3) PV = $800 X [(1-(1/(1+.02)8)/.02] = $5,860.39 Option 4) PV = $1,000 + $5,250 X (1/(1+.02)8) = $5,480.82 Option 4) is the one with lowest cost to Jack.
8-32.
a) n = 4 X 12 = 48 k = .06/12 =0 .005 or 0.5% $18,000 = PMT X [(1-1/1.00548)/0.005] PMT = $18,000/42.58031778 = $422.73
b) n = 6 X 12 = 72 k = .06/12 =0 .005 or 0.5% $18,000 = PMT X [(1-1/1.00572)/0.005] PMT = $18,000/60.33951394 = $298.31
