ow much would you have to invest today to receive the following? Use Appendix B
ID: 2821153 • Letter: O
Question
ow much would you have to invest today to receive the following? Use Appendix B or Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
a. $15,250 in 11 years at 7 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. $19,600 in 18 years at 11 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
c. $8,000 each year for 14 years at 8 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
d. $55,000 each year for 20 years at 14 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Explanation / Answer
Using financial calculator BA II Plus - Input details:
a
b
c
d
I/Y = Rate or yield / frequency of coupon in a year =
7.000000
11.000000
8.000000
14.000000
PMT = Payment = Coupon / frequency =
$0.00
$0.00
$0.00
$0.00
N = Total number of periods = Number of years x frequency =
11
18
14
20
FV = Future Value =
-$15,250.00
-$19,600.00
-$8,000.00
-$55,000.00
CPT > PV = Present Value of the instrument =
$7,245.17
$2,995.31
$2,723.69
$4,001.89
Formula: PV = FV / (1+R)^N =
=15250/(1+7%)^11
=19600/(1+11%)^18
=8000/(1+8%)^14
=55000/(1+14%)^20
Answer:
a.
$7,245.17
b.
$2,995.31
c.
$2,723.69
d.
$4,001.89
Using financial calculator BA II Plus - Input details:
a
b
c
d
I/Y = Rate or yield / frequency of coupon in a year =
7.000000
11.000000
8.000000
14.000000
PMT = Payment = Coupon / frequency =
$0.00
$0.00
$0.00
$0.00
N = Total number of periods = Number of years x frequency =
11
18
14
20
FV = Future Value =
-$15,250.00
-$19,600.00
-$8,000.00
-$55,000.00
CPT > PV = Present Value of the instrument =
$7,245.17
$2,995.31
$2,723.69
$4,001.89
Formula: PV = FV / (1+R)^N =
=15250/(1+7%)^11
=19600/(1+11%)^18
=8000/(1+8%)^14
=55000/(1+14%)^20
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