Calculation of present value - Finance Time Value of money

Document Sample
Calculation of present value - Finance Time Value of money Powered By Docstoc
					              Sub: Finance                                                               Topic: Time value of money



              Question:
              Calculation of present value and payment of the amount.

         ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
                       Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.

              1. Find the value of an annuity in which $1,100 is deposited at the end of each year for 5 years,
              at an interest rate of 11.5% compounded annually.

              2. Determine the amount of each payment to be made to a sinking fund in order to pay off a
              $12,000 loan in 8 1/2 years when the funds earn interest at a rate of 10% compounded semi
              annually.

              3. Find the present value of an ordinary annuity with annual payments of $1,000, for 6 years, at
              10% interest compounded annually.

              Solution:
              Answer 1.

              Present value =            1-(1+.115) ^-n         *pmt = $1,100* 1-(1.115) ^-10                         = $6,344.55

                                            I                                                   0.115

              Answer 2.

              PMT (0.05, 17, 0, 12000, 0) = $464.39 mathematically PMT = i * PV/ (1-(1+i)^-n

              Answer 3.

              Present value =          1-(1+i) ^-n     *pmt = $1,000* 1-(1.1) ^-6                     = $ 4355.2607

                                            I                                    0.10

                                                          ** End of the Solution **
         ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
                       Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.

                                                                www.classof1.com


*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
                                                      lieu of your academic submissions for grades.
missions for grades.

				
DOCUMENT INFO
Shared By:
Stats:
views:37
posted:3/6/2010
language:English
pages:1
Description: Calculation of annuity and determination of payments : Determine the amount of each payment to be made to a sinking fun d in order to pay off a $12,000 loan in 8 ½ years when the funds earn interest at a rate of 10% compounded semi annually.
BUY THIS DOCUMENT NOW PRICE: $5 100% MONEY BACK GUARANTEED
PARTNER ClassOf1 .Com
Classof1 is a supplemental education company providing comprehensive online tutoring, homework guidance, and e-learning courseware development services to the school, college, and university student communities. As a part of its endeavor to help students around the world to excel in their studies, Classof1 has built a repository of self-study guides with step-by-step solutions and lucid explanations. These guides have been created and whetted by expert tutors with several years of experience in education. Apart from Docstoc.com, these self-help guides are also available at Classof1’s Solution Library (http://classof1.com/solution-library). Please visit www.classof1.com for further information.