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Chapter 4 Problem Solutions Summary

This document provides solutions to selected problems from Chapter 4. It lists the problem numbers that have solutions included. The solutions are presented in a condensed format, showing the key steps and calculations to arrive at the answers. Equations are included for compound interest, present value, future value, and annuities. Sample calculations demonstrate the use of tables and formulas to solve time value of money problems involving interest rates, payment amounts, future values, and present values over varying periods of time.

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Fabricio Almendras
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193 views3 pages

Chapter 4 Problem Solutions Summary

This document provides solutions to selected problems from Chapter 4. It lists the problem numbers that have solutions included. The solutions are presented in a condensed format, showing the key steps and calculations to arrive at the answers. Equations are included for compound interest, present value, future value, and annuities. Sample calculations demonstrate the use of tables and formulas to solve time value of money problems involving interest rates, payment amounts, future values, and present values over varying periods of time.

Uploaded by

Fabricio Almendras
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
  • Chapter 4 Solutions

SOLUTIONS TO SELECTED PROBLEMS

Student: You should work the problem completely before referring to the solution.

CHAPTER 4
Solutions included for problems 1, 4, 7, 10, 13, 16, 19, 22, 25, 28, 31, 34, 37, 40, 43, 46,
49, 52, 55, 58, 61, 64, 67, 70, and 73
4.1 (a) monthly (b) quarterly (c) semiannually
4.4 (a) 1 (b) 4 (c) 12
4.7 (a) 5% (b) 20%
4.10 i = (1 + 0.04)4 1
= 16.99%
4.13 0.1881 = (1 + 0.18/m)m 1; Solve for m by trial and get m = 2
4.16 (a) i/week = 0.068/26
= 0.262%
(b) effective
4.19 From 2% table at n=12, F/P = 1.2682
4.22 F = 2.7(F/P,3%,60)
= $15.91 billion
4.25 P = 1.3(P/A,1%,28)(P/F,1%,2)
= $30,988,577
4.28 F = 50(20)(F/P,1.5%,9)
= $1.1434 billion
4.31 i/wk = 0.25%
P = 2.99(P/A,0.25%,40)
= $113.68
4.34

P = (14.99 6.99)(P/A,1%,24)
= 8(21.2434)
= $169.95

4.37 2,000,000 = A(P/A,3%,8) + 50,000(P/G,3%,8)


A = $117,665
Chapter 4

4.40

Move deposits to end of compounding periods and then find F:


F = 1800(F/A,3%,30)
= $85,636

4.43 Move monthly costs to end of quarter and then find F:


Monthly costs = 495(6)(2) = $5940
End of quarter costs = 5940(3) = $17,820
F = 17,820(F/A,1.5%,4)
= $72,900
4.46

4.49

0.127 = er 1
r/yr = 11.96%
r /quarter = 2.99%
i = e0.02 1 = 2.02% per month
A = 50(A/P,2.02%,36)
= 50{[0.0202(1 + 0.0202)36]/[(1 + 0.0202)36 1]}
= $1,968,000

4.52 Set up F/P equation in months:


3P = P(1 + i)60
3.000 = (1 + i)60
i = 1.85% per month (effective)
4.55

First move cash flow in years 0-4 to year 4 at i = 12%:


F = $36,543
Now move cash flow to year 5 at i = 20%:
F = 36,543(F/P,20%,1) + 9000
= $52,852

4.58

Answer is (d)

4.61 Answer is (d)


4.64

i/semi = e0.02 1 = 0.0202 = 2.02%


Answer is (b)

4.67 P = 7 + 7(P/A,4%,25)
= $116.3547 million
Answer is (c)
4.70 PP>CP; must use i over PP (1 year); therefore, n = 7
Answer is (a)
4.73 Deposit in year 1 = 1250/(1 + 0.05)3
Chapter 4

= $1079.80
Answer is (d)

Chapter 4

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