# 123456789

Pages: 1 (358 words) Published: October 29, 2014

Calculating Future Values Compute the future value of \$1,000 compounded annually for a. 10 years at 5 percent.
b. 10 years at 10 percent.
c. 20 years at 5 percent.
d. Why is the interest earned in part (c) not twice the amount earned in part (a)? eq \o\ac(○,a)1000 x ( 1 + 5 % )10 = 1628.89 #
eq \o\ac(○,b)1000 x ( 1 + 10 % )10 = 2593.74 #
eq \o\ac(○,c)1000 x ( 1 + 5 % )20 = 2653.3 #
eq \o\ac(○,d)因為複利每次算利息都是前一年的(利息+本金)*(1+R)，所以不會正好是兩倍# Calculating Interest Rates Solve for the unknown interest rate in each of the following: Present Value Years Interest Rate Future Value \$242 4 eq \o\ac(○,a) \$307 410 8 eq \o\ac(○,b) 896 51,700 16 eq \o\ac(○,c) 162,181 18,750 27 eq \o\ac(○,d) 483,500

eq \o\ac(○,a) 307 = 242 x ( 1 + X )4 → X = 6.13 % # eq \o\ac(○,b) 896 = 410 x ( 1 + X )8 → X = 10.27 % # eq \o\ac(○,c)162181 = 51700 x ( 1 + X )16 → X = 7.41 % # eq \o\ac(○,d)483500 = 18750 x ( 1 + X )27 → X = 12.79 % # Continuous Compounding Compute the future value of \$1,900 continuously compounded for a. 7 years at a stated annual interest rate of 12 percent.

b. 5 years at a stated annual interest rate of 10 percent.
c. 12 years at a stated annual interest rate of 5 percent.
d. 10 years at a stated annual interest rate of 7 percent.
eq \o\ac(○,a)1900 x 2.3164 = 4401.16 #
eq \o\ac(○,b)1900 x 1.6487 = 3132.53 #
eq \o\ac(○,c)1900 x 1.8221 = 3461.99 #
eq \o\ac(○,d)1900 x 2.0138 = 3826.22 #
Calculating Perpetuity Values The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs \$15,000 per year forever. If the required return on this investment is 5.2 percent, how much will you pay for the policy? Suppose the Perpetual Life Insurance Co. told you the policy costs \$320,000.At what interest rate would this be a fair deal? eq...