Tirme ?Whatsthe least you wel set you dam tor ? you can earn the toloang rates o

Question

Tirme ?Whatsthe least you wel set you dam tor ? you can earn the toloang rates of retam on smiwmk nmnentante 15-year penod? (1)6% Q) 10% O) 14% b. Rework part a under the assumption that the $1.800000 payment will be received in 20 tather than 15 years 0 Cick the icon to see the Worked Solution (Formula Soluton 0 Cick the icon to see the Worked Solution (Financial Calculetor Solution Cick the icon to see the Worked Solution (Spreadsheet Souon 1) The least you wil swiyo , Clam ifyou cansam a rate otwan ores angse (2) The wast you wil set you own ftrou can earn arate ofreun of ?0% ang the 15-year Denodns( "15-year penod«C Rond to Round to the earest cent tRandb west cen ) 15-year Derot neare cent tothe eest cent came least you wil seqrovam tryou can earn a rate of swim or 14% ang

Explanation / Answer

Future value = present value ( 1 + r)n

6%

1,600,000 = present value ( 1 + 0.06)15

667,624.1 = present value

10%

1,600,000 = present value ( 1 + 0.10)15

383,027.3 = present value

14%

1,600,000 = present value ( 1 + 0.14)15

224,154.4 = present value

b)

If the year were 20:

6%

1,600,000 = present value ( 1 + 0.06)20

498,887.6 = present value

10%

1,600,000 = present value ( 1 + 0.10)20

237,829.8 = present value

14%

1,600,000 = present value ( 1 + 0.14)20

116,418.8 = present value

When the rate increases, the present value decreses.

When time increases, the present value decreases.

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