1. What is the future value of an 11%, 5-year ordinary annuity that pays $250 each year? Do not round intermediate calculations. Round your answer to the nearest cent.
If this were an annuity due, what would its future value be? Do not round intermediate calculations. Round your answer to the nearest cent.
2. You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 6 years (72 months), and the nominal interest rate would be 6%, with interest paid monthly.
What is the monthly loan payment? Do not round intermediate calculations. Round your answer to the nearest cent.
What is the loan’s EFF%? Do not round intermediate calculations. Round your answer to two decimal places.
3. 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.) Do not round intermediate calculations. Round your answers to the nearest cent.
a. An initial $800 compounded for 1 year at 5%. $_______
b. An initial $800 compounded for 2 years at 5%. $_______
c. The present value of $800 due in 1 year at a discount rate of 5%. $_______
d. The present value of $800 due in 2 years at a discount rate of 5%. $_______
4. Use both the TVM equations and a financial calculator to find the following values. (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.) Do not round intermediate calculations. Round your answers to the nearest cent.
a. An initial $600 compounded for 10 years at 6%. $_______
b. An initial $600 compounded for 10 years at 12%. $_______
c. The present value of $600 due in 10 years at a 6% discount rate. $_______
d. The present value of $600 due in 10 years at a 12% discount rate. $_______
5. Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. (Notes: 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 many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent.
a. $600 per year for 10 years at 10%. $_______
b. $300 per year for 5 years at 5%. $______
c. $600 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.
Future value of $600 per year for 10 years at 10%: $
Future value of $300 per year for 5 years at 5%: $
Future value of $600 per year for 5 years at 0%: $
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