solutions to problem 5-41 (brigham)

a.

b.

University of St. La SalleFIN1A.Y. 2016-2017

Inputs: PV = $1,000I = 10%N = 5

Formula: FV = PV(1+I)^N = 1,610.51$ Wizard (FV): $1,610.51

c.

d.

e.

University of St. La SalleFIN1A.Y. 2016-2017

Inputs: PV = -30FV = 60I = growth rate 2%N = ?

Wizard (NPER): 35.00 = Years to double.

Inputs: PV = -$1,000FV = $2,000I = ?N = 5

Wizard (Rate): 14.87%

Inputs: FV = $1,000I = 10%N = 5

Formula: PV = FV/(1+I)^N = 620.92$ Wizard (PV): 620.92$

f.

g.

h.

i.

j.

University of St. La SalleFIN1A.Y. 2016-2017

Year Payment1 1002 2003 400

Rate = 8%

To find the PV, use the NPV function: PV = $581.59

Inputs: N 10I 8%PV -$1,000

PMT: Use function wizard (PMT) PMT = $149.03

PMT (Due): Use function wizard (PMT) PMT = $137.99

For the PV, each payment would be received one period sooner, hence would be discounted back oneless year. This would make the PV larger. We can find the PV of the annuity due by finding the PV ofan ordinary annuity and then multiplying it by (1 + I).

PV annuity due = $3,352.16 x 1.15 = $3,854.98

Exactly the same adjustment is made to find the FV of the annuity due.

FV annuity due = $6,742.38 x 1.15 = $7,753.74

Inputs: PMT (1,000)$ N 5I 15%

PV: Use function wizard (PV) PV = $3,352.16

FV: Use function wizard (FV) FV = $6,742.38

University of St. La SalleFIN1A.Y. 2016-2017

University of St. La SalleFIN1A.Y. 2016-2017