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    Solution Ch05

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    sovuthy
    1) The document contains mathematical solutions to questions involving present value, future value, annuities, and perpetuities. Formulas are provided to calculate payment amounts for various cash flows over time periods using interest rates. 2) Sample calculations are shown for questions involving topics like annuity due, present value of a series of payments, and determining the payment amount needed to achieve a future value. 3) One question is solved to determine the single deposit on a date that would cover future expenses of $60,000 annually for 20 years, a need of $100,000 in 2030, and $300,000 in 2025, given a 10% interest rate. The required deposit is calculated as $

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    Solution Ch05

    Uploaded by

    sovuthy
    120 views14 pages
    1) The document contains mathematical solutions to questions involving present value, future value, annuities, and perpetuities. Formulas are provided to calculate payment amounts for various cash flows over time periods using interest rates. 2) Sample calculations are shown for questions involving topics like annuity due, present value of a series of payments, and determining the payment amount needed to achieve a future value. 3) One question is solved to determine the single deposit on a date that would cover future expenses of $60,000 annually for 20 years, a need of $100,000 in 2030, and $300,000 in 2025, given a 10% interest rate. The required deposit is calculated as $

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    1) The document contains mathematical solutions to questions involving present value, future value, annuities, and perpetuities. Formulas are provided to calculate payment amounts for various cash flows over time periods using interest rates. 2) Sample calculations are shown for questions involving topics like annuity due, present value of a series of payments, and determining the payment amount needed to achieve a future value. 3) One question is solved to determine the single deposit on a date that would cover future expenses of $60,000 annually for 20 years, a need of $100,000 in 2030, and $300,000 in 2025, given a 10% interest rate. The required deposit is calculated as $

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    120 views14 pages

    Solution Ch05

    Uploaded by

    sovuthy
    1) The document contains mathematical solutions to questions involving present value, future value, annuities, and perpetuities. Formulas are provided to calculate payment amounts for various cash flows over time periods using interest rates. 2) Sample calculations are shown for questions involving topics like annuity due, present value of a series of payments, and determining the payment amount needed to achieve a future value. 3) One question is solved to determine the single deposit on a date that would cover future expenses of $60,000 annually for 20 years, a need of $100,000 in 2030, and $300,000 in 2025, given a 10% interest rate. The required deposit is calculated as $

    Copyright:

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    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 14

    Chapter 5

    ST-2, Q.5-13A, 14A, 25A, 33A, 37A


    38A, 21B, 27B, 41B
    Page 167 ST-2
    Mathematical Solution:
    PV = PMT (PVIFA i, n )
    30,000 = PMT (PVIFA 13%, 10 ) (use PVIFA table, or)
    1
    PV = PMT 1 - (1 + i)n
    i

    1
    30,000 = PMT 1 - (1.13 )10
    .13

    2
    PMT = 5,528.69
    Page 168 Q.5-13A
    Mathematical Solution:
    PV = PMT (PVIFA i, n )
    60,000 = PMT (PVIFA 9%, 25 ) (use PVIFA table, or)
    1
    PV = PMT 1 - (1 + i)n
    i

    1
    60,000 = PMT 1 - (1.09 )25
    .09

    3
    PMT = 6,108.38
    Page 169 Q.5-14A
    Mathematical Solution:
    FV = PMT (FVIFA i, n )
    15,000 = PMT (FVIFA 6%, 15 ) (use FVIFA table, or)

    FV = PMT (1 + i)n - 1
    i

    15,000 = PMT (1.06)15 - 1


    .06

    4
    PMT = 644.44
    Page 170 Q.5-25A
    Mathematical Solution:
    At year ten PV = 10,000 (PVIFA 6%, 5 ) + 20,000 (PVIF 6%, 5 )
    = 42,123.64 + 14,945.16 = 57,068.80

    At year 0; PV = 57,068.80 (PVIF 6%, 10 )


    = 31,866.92

    5
    Page 170 Q.5-33A
    Mathematical Solution:
    Saving at year ten = 100,000 (FVIF 7%, 10 ) = 196,715.14
    Stock at year ten = 300,000 (FVIF 12%, 10 ) = 931,754.46
    Annual deposit
    = 10,000 (FVIFA 7%, 5 ) (FVIF 7%, 5) + 20,000 (FVIFA 7%, 5 )
    = 80,657.09 +115,014.78 = 195,671.87

    Total at year ten = 1,324,141.47

    Find payment after retirement


    1,324,141.47 = PMT (PVIFA 10%, 20 )
    PMT = 155,533.16 6
    Page 171 Q.37-A (Annuity Due)
    Mathematical Solution:
    FV = PMT (FVIFA i, n ) (1 + i)
    FV = 1,000 (FVIFA 10%,10 ) (1.10) (use FVIFA
    table, or)

    FV = PMT (1 + i)n - 1 (1 + i)
    i
    FV = 1,000 (1.10)10 - 1 (1.10)
    .10
    7
    FV = 17,531.17
    Page 171 Q.37-A (Annuity Due)
    Mathematical Solution:
    FV = PMT (FVIFA i, n ) (1 + i)
    FV = 1,000 (FVIFA 15%,10 ) (1.15) (use FVIFA table,
    or)

    FV = PMT (1 + i)n - 1 (1 + i)
    i
    FV = 1,000 (1.15)10 - 1 (1.15)
    .15
    8
    FV = 23,349.28
    P.171 Q.38-A (ANNUITY DUE)
    Mathematical Solution:
    PV = PMT (PVIFA i, n ) (1 + i)
    PV = 1,000 (PVIFA 10%, 10 ) (1.10) (use PVIFA table, or)

    1
    PV = PMT 1 - (1 + i)n (1 + i)
    i
    1
    PV = 1000 1 - (1.10 )10 (1.10) = $6,759.02
    .10 9
    P.171 Q.38-A (ANNUITY DUE)
    Mathematical Solution:
    PV = PMT (PVIFA i, n ) (1 + i)
    PV = 1,000 (PVIFA 15%, 10 ) (1.15) (use PVIFA table, or)

    1
    PV = PMT 1 - (1 + i)n (1 + i)
    i
    1
    PV = 1000 1 - (1.15 )10 (1.15) = $5,771.58
    .15 10
    Present Value of a Perpetuity
    So,the PV of a perpetuity is very
    simple to find:

    11
    P. 177 Q.5-21B
    a. PV = 400/0.09
    b. PV = 1,500/0.13
    c. PV = 150/0.10
    d. PV = 100/0.06

    12
    Page 177 Q.5-27B
    Mathematical Solution:
    PV = PMT (PVIFA i, n )
    45,000 = 9,000 (PVIFA i, 5 ) (use PVIFA table, or)
    1
    PV = PMT 1 - (1 + i)n
    i

    1
    45,000 = 9,000 1 - (1 + i )5
    i

    Because 9,000*5years = 45,000  i = 0% 13


    Page 179 Q.5-41B 60,000 60,000 --- 60,000 100,000

    2005 -- --- 2010 2011 --- 2029 2030 ---

    60,000 expense (Jan 2010 – Jan 2029)


    PV0 = 60,000 (PVIFA 10%, 20) (PVIF 10%, 4)
    = 348,892.71
    100,000 need on Jan 2030
    PV0 = 100,000 (PVIF 10%, 25) = 9,229.60
    300,000 need on Jan 2025
    PV0 = 300,000 (PVIF 10%, 20) = 44,593.09

    14
    Total deposit on Jan 2005 = $402,715.40

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