https:// ect nroll Add, or Drop Classes ered Inde Uee approprwte fectorts from t
ID: 2400263 • Letter: H
Question
https:// ect nroll Add, or Drop Classes ered Inde Uee approprwte fectorts from the tables pronided 1.Jahn Jemison wents to eccumulate $75.454 for a down payment on n smell busness. He will mvest $32,000 todey n a bank account paying 10% merest compounded was y Approummy how long wd take John to reach his goal 2 The Jasmine Tes Company parchased merchendise from a suppher for $44,351. Payment wes s noninterest bearing note requiring Jasmine to aake tve ennusi peyments of $t2.000 beginning one year from the date of purchaue What is the Irterest rate implct in 3. Sem Robinson bornowed $19,000 from a friend and promsed to pay the loan In 12 equal annual Instaliments beginning one yes horn the date ofthionn. Sem's "send would like to beremburiedfor the tine vate or money at en 11% annual nst, wha ate annual payment Sem must ake to pay back his friend John Jemison wants to eccumlate $75,454 for e down payment on a smat business invest $432,000 0ddy n a bank acan, peying 10% interest campo ndad arem. Apprainatay how ing witt it tait bin to retch his goa? (O neg roun intermediate calclations. Round your nal anewers to naaret whois dotaw amount. Present Value
Explanation / Answer
1) Given Future Value = $75454
$32000 is the present value that he will invest today to accumulate $75454
i = 10%
n = ?
$32000/$75454 = 0.4241(this is the PV factor provided in the table)
N = 9 periods at 10%(0.4241 on the table)
2)Given $44351 is the PV of a stream of five $12000 annual payments beginning from one year
We have to find out the factor which gives us the interest rate
$44351/$12000 = 3.6959(PV factor for ordinary annuity for five payments)
At 11% PV factor for ordinary annuity for five periods is 3.6959
3)We are given
time =12 years
r = 11%
Present value of an ordinary equity at 11%,12 years =6.4924
Annual payback amount = $19000/6.4924 = $2926.50
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