Q:

2-1

2-9 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 “override” the variable that changes by simply entering a

new value for it and then pressing the key for the unknown variable to obtain the

second answer. This procedure can be used in parts b and d, and in many other situations,

to see how changes in input variables affect the output variable.)

a. An initial $500 compounded for 1 year at 6%.

b. An initial $500 compounded for 2 years at 6%.

c. The present value of $500 due in 1 year at a discount rate of 6%.

d. The present value of $500 due in 2 years at a discount rate of 6%.

 

2-12. Find the future value of the following annuities. The first payment in these annuities

is made at the end of Year 1; that is, they are ordinary annuities. (Notes: See the hint

to Problem 2-9. Also, note that you can leave values in the TVM register, switch to

“BEG,” press FV, and find the FV of the annuity due.)

a. $400 per year for 10 years at 10%.

b. $200 per year for 5 years at 5%.

c. $400 per year for 5 years at 0%.

d. Now rework parts a, b, and c assuming that payments are made at the beginning

of each year; that is, they are annuities due.

2-28Assume that you inherited some money. A friend of yours is working as an unpaid

intern at a local brokerage firm, and her boss is selling securities that call for 4 payments, $50 at the end of each of the next 3 years, plus a payment of $1,050 at the

end of Year 4. Your friend says she can get you some of these securities at a cost of

$900 each. Your money is now invested in a bank that pays an 8% nominal (quoted)

interest rate but with quarterly compounding. You regard the securities as being

just as safe, and as liquid, as your bank deposit, so your required effective annual

rate of return on the securities is the same as that on your bank deposit. You must

calculate the value of the securities to decide whether they are a good investment.

What is their present value to you?

 

Attachments:
Perform TVM calculations week 1.doc (27K)

Attachments:
   
   
   
   

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