Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 5, Problem 24P
a.
Summary Introduction
To compute: Present value of $500 at 12% nominal rate semiannual compounding, discounted back 5 years.
Present Value of Cash Flow:
It is also called as discounted value; it defines that amount of money that is invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.
b.
Summary Introduction
To compute: Present value of $500 at 12% nominal rate, quarterly compounding, and discounted back 5years.
Present Value of Cash Flow:
It is also called as discounted value; it defines that amount of money thatis invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.
c.
Summary Introduction
To compute: Present value of $500 at 12% nominal rate , monthly compounding, discounted back 1year.
Present Value of Cash Flow:
It is also called as discounted value; it defines that amount of money thatis invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.
d.
Summary Introduction
To explain: Reason of difference in present value of part a andb.
Present Value of Cash Flow:
It is also called as discounted value; it defines that amount of money that is invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.
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2. Find the present value of $500 due in the future under each of these conditions:
a. 12% nominal rate, semiannual compounding, discounted back 5 years
b. 12% nominal rate, quarterly compounding, discounted back 5 years
c. 12% nominal rate, monthly compounding, discounted back 1 year
Hint: identify the interest rate per period and the total number of periods in each scenario first.
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Method A assumes simple interest over nal fractional periods, while Method B assumes simple discount over nal fractional periods. The annual eective rate of interest is 20%. Find the ratio of the present value of a payment to be made in 1.5 years computed under method A to that computed under Method B
PRESENT VALUE FOR VARIOUS DISCOUNTING PERIODS
Find the present value of $500 due in the future under each of these conditions:
a. 12% nominal rate, semiannual compounding, discounted back 5 years
b. 12% nominal rate, quarterly compounding, discounted back 5 yearsc. 12%nominalrate,monthlycompounding,discountedback1year
Chapter 5 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 5 - Prob. 1QCh. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - The present value of a perpetuity is equal to the...Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - What is a loan amortization schedule, and what are...Ch. 5 - Prob. 1PCh. 5 - Prob. 2P
Ch. 5 - FINDING THE REQUIRED INTEREST RATE Your parents...Ch. 5 - TIME FOR A LUMP SUM TO DOUBLE If you deposit money...Ch. 5 - TIME TO REACH A FINANCIAL GOAL You have 42,180.53...Ch. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - LOAN AMORTIZATION AND EAR You want to buy a car....Ch. 5 - PRESENT AND FUTURE VALUES FOR DIFFERENT PERIOOS...Ch. 5 - Prob. 10PCh. 5 - GROWTH RATES Shalit Corporations 2014 sales were...Ch. 5 - EFFECTIVE RATE OF INTEREST Find the interest rates...Ch. 5 - Prob. 13PCh. 5 - FUTURE VALUE OF AN ANNUITY Find the future values...Ch. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - EFFECTIVE INTEREST RATE You borrow 85,000; the...Ch. 5 - Prob. 18PCh. 5 - FUTURE VALUE OF AN ANNUITY Your client is 40 years...Ch. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - FUTURE VALUE FOR VARIOUS COMPOUNDING PERIODS Find...Ch. 5 - Prob. 24PCh. 5 - FUTURE VALUE OF AN ANNUITY Kind the future values...Ch. 5 - PV AND LOAN ELIGIBILITY You have saved 4,000 for a...Ch. 5 - EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A...Ch. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - REQUIRED LUMP SUM PAYMENT Starting next year, you...Ch. 5 - Prob. 32PCh. 5 - FV OF UNEVEN CASH FLOW You want to buy a house...Ch. 5 - AMORTIZATION SCHEDULE a. Set up an amortization...Ch. 5 - Prob. 35PCh. 5 - NONANNUAL COMPOUNDING a. You plan to make five...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - REQUIRED ANNUITY PAYMENTS Your father is 50 years...Ch. 5 - Prob. 40PCh. 5 - Prob. 41SPCh. 5 - Prob. 42IC
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