SOLUTIONS TO SELECTED PROBLEMS Student: You should work the problem completely before referring to the solution.

CHAPTE !
Solutions included for problems 1 ! " 1# 1$ 1% 1& '' '( ') $1 $! $" !# !$ !% *nd !& 1+1 Time ,*lue of mone- me*ns t.*t t.ere is * cert*in /ort. in .*,in0 mone- *nd t.e /ort. c.*n0es *s * function of time+ 1+! Ne*rest t*stiest 1uic2est cl*ssiest most scenic etc 1+" Minimum *ttr*cti,e r*te of return is t.e lo/est r*te of return 3interest r*te4 t.*t comp*nies or indi,idu*ls consider to be .i0. enou0. to induce t.em to in,est t.eir mone-+ 1+1# R*te of incre*se 5 63'& 7 ''48''9:1## 5 $1+); 1+1$ Profit 5 ) million:#+') 5 <' '!# ### 1+1% 3*4 E1ui,*lent future *mount 5 1# ### = 1# ###3#+#)4 5 1# ###31 = #+#)4 5 <1# )## 3b4 E1ui,*lent p*st *mount> P = #+#)P 5 1# ### 1+#)P 5 1# ### P 5 <&'(&+'% 1+1& 1+'' )# ### = )# ###3i4 5 1## ### i 5 '(; Simple> 1 ### ### 5 (## ### = (## ###3i43(4 i 5 '#; per -e*r simple Compound> 1 ### ### 5 (## ###31 = i4( 31 = i4( 5 '+#### 31 = i4 5 3'+####4#+' i 5 1!+)";

1+'( Pl*n 1> Interest p*id e*c. -e*r 5 !## ###3#+1#4 5 <!# ### C.*pter 1 1

Tot*l p*id 5 !# ###3$4 = !## ### 5 <('# ### Pl*n '> Tot*l due *fter $ -e*rs 5 !## ###31 = #+1#4$ 5 <($' !## Difference p*id 5 ($' !## 7 ('# ### 5 <1' !## 1+') 3*4 ?@3i; n A P4 finds t.e future ,*lue ? 3b4 IRR3firstBcell>l*stBcell4 finds t.e compound interest r*te i 3c4 PMT3i; n P ?4 finds t.e e1u*l periodic p*-ment A 3d4 P@3i; n A ?4 finds t.e present ,*lue P+ 1+$1 ?or builtCin EDcel functions * p*r*meter t.*t does not *ppl- c*n be left bl*n2 /.en it is not *n interior one+ ?or eD*mple if t.ere is no ? in,ol,ed /.en usin0 t.e PMT function to sol,e * p*rticul*r problem it c*n be left bl*n2 bec*use it is *n end function+ E.en t.e function in,ol,ed is *n interior one 3li2e P in t.e PMT function4 * comm* must be put in its position+ 1+$! Fi0.est to lo/est r*te of return is *s follo/s> Credit c*rd b*n2 lo*n to ne/ business corpor*te bond 0o,ernment bond interest on c.ec2in0 *ccount 1+$" End of period con,ention me*ns t.*t t.e c*s. flo/s *re *ssumed to .*,e occurred *t t.e end of t.e period in /.ic. t.e- too2 pl*ce+
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i 5 1(; # 1 ' $ ! (

1+!# T.e c*s. flo/ di*0r*m is>

1+!$ 1+!%

! 5 "'8i i 5 1); per -e*r 'P 5 P = P3#+#(43n4 n 5 '# Ans/er is 3d4

<!# ###

1+!& Ans/er is 3c4

C.*pter 1

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