BUAD 306 Fall 2015 Practice Problems 2 Solutions 1 Future Value interest principal 3 400 x 06 x 7 3 400 4 828 2 Future Value 115 000 1 011 12 131 132 91 N 12 PV 115 000 I Y 1 1 CMPT FV 131 132 91 3 Present Value 75 000 1 1 065 10 39 954 45 N 10 I Y 6 5 FV 75 000 CMPT PV 39 954 45 Present Value 75 000 1 1 06 10 41 879 61 N 10 I Y 6 0 FV 75 000 PV 41 879 61 Difference 41 879 61 39 954 45 1 925 16 4 Present Value 110 000 1 1 015 7 99 112 95 N 7 I Y 1 5 FV 110 000 CMPT PV 99 112 95 Present Value 110 000 1 1 015 6 100 599 64 N 6 I Y 1 5 FV 110 000 PV 100 599 64 Difference 100 599 64 99 112 95 1 486 69 more 5 1st Annuity Annuity Due N 30 PMT 2 000 BEGINNING OF PERIOD calculator must reflect To set 2nd PMT hits BGN 2nd Enter hits Set I Y 10 CMPT PV 20 739 21 2nd Annuity Ordinary Annuity BE SURE TO SET CALCULATOR BACK TO END same as above repeated PV 20 739 21 N 30 I Y 10 CMPT PMT 2 200 Check Because payment is received one year earlier it should equal 2 000 x 1 10 2 200 Works 6 N 16 4 quarters x 4 years I Y 1 4375 5 75 APR 4 FV 1 000 000 CMPT PMT BGN 55 239 90 REMEMBER payments being made at beginning of quarter so make sure to set calculator to BGN and set it back to END after calculation 7 APR 0475 x 4 19 19 0 8 Continuous Compounding EAR e 07 1 0725 Additional interest 900 x 0725 07 2 25 9 Choose Loan A because it has the lower EAR
View Full Document
Unlocking...