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2%
12%
3%
1%
717
EXERCISES
Exercise B-1 (10 minutes)
In Table B.2, where i = 12% and f = $96,463/$10,000 = 9.6463, the n = 20
(implies the investor must wait 20 years before payment).
719
Number of
Periods
3
7
9
2
8
5
Interest Rate
4%
8
10
4
6
2
Number of
Periods
1
2
3
4
5
6
Table B.1
Value
0.8890
0.5835
0.4241
0.9246
0.6274
0.9057
Amount
Borrowed
$35,560
$43,763
$22,053
$16,643
$39,526
$80,607
Interest
Rate
6%
6
6
6
6
6
Table B.1
Value
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
Amount
Borrowed
$ 4,717
4,450
4,198
3,961
3,737
3,525
$24,588
Interest
Rate
6%
6
6
6
Table B.1
Value
0.9434
0.8900
0.8396
0.7921
Amount
Borrowed
$ 7,076
6,675
6,297
5,941
$25,989
Second Annuity
Future
Payment
$7,500
7,500
7,500
7,500
Number of
Periods
1
2
3
4
Second Annuity
Payment size ....................................... $ 7,500
Number of payments ..........................
4
Interest rate .........................................
6%
Value from Table B.3 .......................... 3.4651
Present value of the annuity ............. $25,988
(difference from part (1) due to rounding)
721
b.
(1)
(2)
(3)
OR
(1)
(2)
(3)
(1)
(2)
(3)
OR
(1)
(2)
(3)
c.
(1)
(2)
(3)
d.
(1)
(2)
(3)
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