Professional Documents
Culture Documents
Chap 3 Homework With Supplementals
Chap 3 Homework With Supplementals
Chap 3 Homework With Supplementals
Problems
1)
a)
Method 1
PV
Interest
n
$ 12,000
9%
7
12000
13080
Method 2
$
Method 3
b)
$21,936.47
0
12,000 $
Method 1
n=
m=
7
4
$
Method 2
Method 3
c)
Reminder
Better--->
PV
n
$ 25,000
1
Better --->
1
12,270
22,374.54
$22,374.54
a)
2)
21,936.47
b)
9.31%
Alternative 1
m
i
12
7%
Alternative 2
m
i
1
8%
9.31%
9.00%
Method 1
3)
PMT
n
m
i
5000
12
2
8.50%
FV
Periods
Scenario 1
$
201,806
Scenario 2
$
210,382 13576.74095868
Note: he does not make a deposit at the end of the last p
Method 2
$201,805.67
$210,382.41
7)
PMT
n
IRR
2150
10
18%
Method 1
PV =
CF
9,662
0
0
PV
CF
11,401
2150
2150
Method 2
PVA
PMT
N
i
PV
2150
10
18%
9662.285534087
PVA
PMT
N
i
PV
2150
9
18%
9251.496930223
$11,401.50
Method 3
8)
FV
n
m
i
$ 45,000
6
4
18%
PV =
$9,662.29
PV =
$11,401.50
Method 1
PV=
15,647
Method 2
PV =
10)
Method 1
$15,647
-7000
7.92%
No, John should not pay for the lot at $7,000 beca
Method 2
a) PV
N
i
5783.15
10
10%
FV
15000
PV
N
i
FV
7000.00
10
7.92%
15000
Method 3
pv =
13)
1) Method 1
i
m
vs.
m
7.92%
same as above, no John should not pay $7,000 for the lot because
13%
1
12
0
annual
monthly
$
$
24,991
24,522
1
5500
4867.256637168
$
4,833
Method 2
Price
$
0
1
24,990 $
(24,990)
5500
IRR -->
13.00%
Arrived at by goal seek changing the purchase price until the IRR equals 13%
14)
0
-24522
13.80%
1
0
13.80%
2
0
Method 1
i
wrong
1.50%
<- Periodic Rate
19.56%
1.5%
18%
0.0006708754
0
1
-100000
1500
-100000 1477.832512563
Solve for the Monthly Periodic Rate that makes the discounted cash flow equal to $
Method 2
Right
Wrong!!
19.56%
1.50%
18%
18)
i
Method 1
10%
$
Method 2
10.00%
0.00
IRR Function
0
1
-13000
5000
-13000 4545.454545455
14257.2
2
12,546 $
20125.2 21936.47
3
4
5
6
7
8
12,828 $ 13,117 $ 13,412 $ 13,714 $ 14,022 $ 14,338
0
(12,000)
0
(12,000)
26,807
1
0
1
0
2
0
2
0
3
0
3
0
4
0
4
0
5
0
5
0
<--Wrong!
FV
$26,807
0.072286
Method 1
Method 2
$
27,000
$27,000
FV
FVA Formula
$ 201,805.67
210,382.41
2150
2150
2150
2150
2150
2150
2150
1822.033898 1544.09652399 1308.556 1108.946 939.7848 796.4278 674.9388
2150
2150
2150
2150
2150
2150
2150
1822.033898 1544.09652399 1308.556 1108.946 939.7848 796.4278 674.9388
$9,662.29
2150
11401.5
y for the lot at $7,000 because it will result in a yield of less than the 10% he thinks he should earn.
ed at 10% it is worth less than the asking price, john should not pay the $7,000 asked.
one could also just plug in numbers and estimate the rate be seeing the PV change.
y $7,000 for the lot because it will yeild less that the 10% he thinks it should.
2
3
4
7500
9500
12500
5873.600125 6583.97654164 7666.484
$
5,791 $
6,446 $ 7,452
2
7500
3
9500
4
12500
4
0
5
0
2
3
4
1500
1500
1500
1455.992623 1434.47549133 1413.276
6
0
7
0
5
6
1500
1500
1392.39 1371.813
8
0
9
0
7
8
1500
1500
1351.54 1331.567
2
1000
826.446281
3
4
5
6
0
5000
6000
863.65
0 3415.067 3725.528 487.5079
9
10
11
12
13
14
15
16
$ 14,661 $ 14,990 $ 15,328 $ 15,673 $ 16,025 $ 16,386 $ 16,754 $ 17,131
6
7
0 21936.47
6
7
0
0
8
0
9
0
10
0
11
0
12
0
13
0
10
11
12
13
14
15
hould earn.
10
2150
2150
2150
571.9821 484.7306 410.7886
2150
2150
571.9821 484.7306
10
15000
0
0
10
0
11
0
9
10
1500
1500
1311.888 1292.501
12
5500
13
0
14
0
15
0
16
0
17
0
11
12
13
14
15
16
1500
1500
1500
1500
1500
1500
1273.4 1254.581 1236.041 1217.774 1199.777 1182.047
17
18
19
20
21
22
23
24
$ 17,517 $ 17,911 $ 18,314 $ 18,726 $ 19,147 $ 19,578 $ 20,019 $ 20,469
14
0
15
0
16
0
17
0
18
0
19
0
20
0
21
0
16
17
18
19
20
21
22
23
5212.5
5212.5
18
0
19
0
20
0
21
0
22
0
23
0
24
7500
25
0
17
18
19
20
21
22
23
24
1500
1500
1500
1500
1500
1500
1500
1500
1164.578 1147.367 1130.411 1113.706 1097.247 1081.031 1065.056 1049.316
25
26
27
28
$ 20,930 $ 21,401 $ 21,882 $ 22,375
22
0
24
5000
23
0
24
0
25
0
26
0
27
0 $
28
22,374.54
26
0
27
0
28
0
29
0
30
0
31
0
32
0
33
0
34
0
25
26
27
28
29
30
31
32
33
1500
1500
1500
1500
1500
1500
1500
1500
1500
1033.809 1018.531 1003.479 988.6489 974.038 959.644 945.46172399 931.489 917.724
35
0
36
9500
37
0
38
0
39
0
40
0
41
0
42
0
43
0
44
0
34
35
36
37
38
39
40
41
42
43
1500
1500
1500
1500
1500
1500
1500
1500
1500
1500
904.161 890.799 877.635 864.665 851.886 839.297 826.893 814.673 802.634 790.772
45
0
46
0
47
0
48
12500
44
45
46
47
48
49
50
51
52
53
1500
1500
1500
1500
1500
1500
1500
1500
1500
1500
779.086 767.572 756.229 745.053 734.043 723.195 712.507 701.977 691.603 681.383
54
55
56
57
1500
1500
1500
1500
671.313 661.392 651.618 641.988
58
59
1500
1500
632.5 623.153
60
101500
41544
Chapter 3
years
4
1
3
2
2
3
Problem 5
$ 2,500.00
$ 3,528.95
Interest Rate
$
$
$
$
750.00
891.08
9%
Not Part of the Question, but what are these payments worth today given a 12% discount rate?
$
3,592
2,232
534
Problem 11
Years
8.14%
0
-100000
15000
15000
15000
-100000
Problem 15
9
Years
Interest
10%
Payment Formula
$ 3,137.27
$ 7,397.52
$ 3,137.27
$ 6,725.02
$ 3,137.27
$ 6,113.65
($0.0586)
Not the Question, but what if the payments are made annually, but the interest compounds mont
$ 3,067.09
$ 7,515.75
$ 3,067.09
$ 6,803.35
$ 3,067.09
$ 6,158.48
1
4
0
5
$ 1,300.00
$ 1,417.00
$ 5,837.03
826
15000
10
15000
15000
15000
15000
15000
15000
mpounded monthly?
0
10
$ 3,137.27
$ 5,557.86
$ 3,137.27
$ 5,052.60
$ 3,137.27
$ 4,593.28
$ 3,137.27
$ 4,175.71
$ 3,137.27
$ 3,796.10
$ 3,137.27
$ 3,451.00
$ 3,137.27
$ 3,137.27
$ 3,067.09
$ 4,567.99
$ 3,067.09
$ 4,135.00
$ 3,067.09
$ 3,743.05
$ 3,067.09
$ 3,388.26
$ 3,067.09
$ 3,067.09
$ 3,067.09
$ 5,046.31
11
12
50,000.00
50,000.00
15000
13
14
15
16
17
18
19
20
21
22
23
24
15000
25
26
27
28
29
30
31
32
33
34
35
36
15000
37
38
39
40
41
42
43
44
45
46
47
48
15000
49
50
51
52
53
54
55
56
57
58
59
60
15000
61
62
63
64
65
66
67
68
69
70
71
72
15000
73
74
75
76
77
78
79
80
81
82
83
84
15000
85
86
87
88
89
90
91
92
93
94
95
96
15000
97
98
99
100
101
102
103
104
105
106
107
108
15000
109
110
111
112
113
114
115
116
117
118
119
120
15000