Chapter 2 Problems 1. If you deposit $10,000 in a bank account that pays 10% int

Question

Chapter 2 Problems
1. If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?

2. What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually?

6. What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be?

9. Find the following values, using the equations, and then work the problems using a financial calculator to check your answers. Disregard rounding differences. (Hint: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can

Explanation / Answer

9.a 500*(1+0.06)=530

b 500*(1+0.06) =561.8

c 500/(1+0.06)=471.70

d 500/(1+0.06)^2=444.50

12 a 400*((1+0.1)^10-1)/10 =6374.97

b 200*((1+0.05)^5-1)/5=2210.25

c 200*((1+0.00)^5-1)/5=200

d 400*((1+0.1)^10-1)/10*1.1 =7012.47

d 200*((1+0.05)^5-1)/5*1.05=2320.77

d 200*((1+0.00)^5-1)/5*1.=200

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