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Your company is planning to borrow $1,000,000 on
a 5-year, 15%, annual payment, fully amortized term
loan. What fraction of the payment made at the end
of the second year will represent repayment of
Week 4 Solution
Essay
5
Test_prep
principal?
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n = 5 I/Yr = 15 PV = -$1,000,000
350_Ch05[1] BSA554 Week 2 FV = 0 Solve for PMT
PMT = $298,315.55
Notes Homework
Homework

❧Now set up amortization table:

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FIN CHAP 06 Chapter 4-

Now set up amortization table:

SOLUTIONS… Solutions to…
Notes Homework

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Year Beg. Payment Interest Principal Ending

View more Balance Balance

Bookmarked 0 Recently viewed 1 $1,000,000 298,315.55 150,000 148,315.55 851,684.45

ACCT 3100
2 851,684.45 298,315.55 127,752.67 170,562.88 681,121.57
tvm practice proble…

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= $170,562.88/$298,315.55
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= 0.5718
= 57.18%

The prize in last week’s Florida lottery was estimated to be

worth $35 million. If you were lucky enough to win, the
state will pay you $1.75 million per year over the next 20
years. Assume that the first installment is received
immediately.
❧ A. If interest rates are 8%, what is the present
value of the prize?
❧ 0________1_______ . . . . _______19_______20

1.75 1.75 (in millions) 1.75 1.75

i = 8%
Using a financial calculator first switch to BEGIN or DUE: N = 20 i =

8 PMT = 1,750,000 FV = 0 solve for PV PV =

$18,556,299

Assume the compounding/discounting occurs once a

year?

❧ A. An initial $500 compound for 10 years at 6

percent.
❧ 0______1______2______ . . . ______9______10

-500 i = 6% FV = ?

PV = 500 ii = 6% n = 10
computer FV FV = 895.42

b. An initial $500 compounded for 10

years at 12%.

❧ 0______1______2______ . . . ______9______10

-500 i = 12% FV = ?

❧ PV = 500 ii = 12% n=10

❧ Compute FV FV = 1,552.92

The present value of $500 due in 10 years at a 6%

discount rate.

❧ 0______1______2______ . . . ______9______10

PV = ? i = 6% 500

❧ FV = 500 ii = 6% n = 10
❧ Compute PV PV= $279.20

Find the amount to which $500 will grow under each

of the following conditions
A. 12% compounded annually for 5
years.

❧ 0______1_______2_______3_______4_______5

-500 i = 12% FV = ?

❧ With a financial calculator:

N = 5 i = 12 PV = -500 PMT = 0
solve for FV FV = $881.17

b. 12% compounded semiannually for 5 years

❧0_____1______2____ . . . ____9______10

-500 i = 6% FV = ?

❧ By using a financial calculator FV = $895.42

c. 12% compounded quarterly for 5 years

❧0_____1______2____ . . . ____19______20

-500 i = 3% FV = ?

❧ By using a financial calculator FV = $903.06

d. 12% compounded monthly for 5 years

❧0_____1______2____ . . . ____59______60

-500 i = 1% ?

❧ By using a financial calculator FV = $908.35

University of Toledo • ACCT 3100 • 싚 100% (4)

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