SOLUTIONS TO SELECTED PROBLEMS

Student: You should work the problem completely before referring to the solution.
CHAPTE !
Solutions included for problems 1 ! " 1# 1$ 1% 1& '' '( ') $1 $! $" !#
!$ !% *nd !&
1+1 Time ,*lue of mone- me*ns t.*t t.ere is * cert*in /ort. in .*,in0 mone- *nd t.e
/ort. c.*n0es *s * function of time+
1+! Ne*rest t*stiest 1uic2est cl*ssiest most scenic etc
1+" Minimum *ttr*cti,e r*te of return is t.e lo/est r*te of return 3interest r*te4 t.*t
comp*nies or indi,idu*ls consider to be .i0. enou0. to induce t.em to in,est t.eir
mone-+
1+1# R*te of incre*se 5 63'& 7 ''48''9:1## 5 $1+);
1+1$ Profit 5 ) million:#+') 5 <''!####
1+1% 3*4 E1ui,*lent future *mount 5 1#### = 1####3#+#)4
5 1####31 = #+#)4
5 <1#)##
3b4 E1ui,*lent p*st *mount> P = #+#)P 5 1####
1+#)P 5 1####
P 5 <&'(&+'%
1+1& )#### = )####3i4 5 1#####
i 5 '(;
1+'' Simple> 1###### 5 (##### = (#####3i43(4
i 5 '#; per -e*r simple
Compound> 1###### 5 (#####31 = i4
(

31 = i4
(
5 '+####
31 = i4 5 3'+####4
#+'
i 5 1!+)";
C.*pter 1 1
P"P#ETAY $ATE#A%+ ? T.e Mc@r*/ABill Comp*nies Inc+ Cll ri0.ts reser,ed+ No p*rt of t.is solution m*- be
displ*-ed reproduced or distributed in *n- form or b- *n- me*ns /it.out t.e prior /ritten permission of t.e publis.er or used
be-ond t.e limited distribution to students te*c.ers *nd educ*tors permitted b- Mc@r*/ABill for t.eir indi,idu*l courses+ Cs *
student -ou *re in,ited to refer to *nd le*rn from t.is solution but -ou s.ould not submit it *s -our o/n /or2 for * course in /.ic.
-ou *re enrolled+ Suc. *ction is considered pl*0i*rism+
1+'( Pl*n 1> Interest p*id e*c. -e*r 5 !#####3#+1#4
5 <!####
Tot*l p*id 5 !####3$4 = !#####
5 <('####
Pl*n '> Tot*l due *fter $ -e*rs 5 !#####31 = #+1#4
$
5 <($'!##
Difference p*id 5 ($'!## 7 ('####
5 <1'!##
1+') 3*4 DE3i;nCP4 finds t.e future ,*lue D
3b4 IRR3firstFcell>l*stFcell4 finds t.e compound interest r*te i
3c4 PMT3i;nPD4 finds t.e e1u*l periodic p*-ment C
3d4 PE3i;nCD4 finds t.e present ,*lue P+
1+$1 Dor builtAin EGcel functions * p*r*meter t.*t does not *ppl- c*n be left bl*n2 /.en
it is not *n interior one+ Dor eG*mple if t.ere is no D in,ol,ed /.en usin0 t.e PMT
function to sol,e * p*rticul*r problem it c*n be left bl*n2 bec*use it is *n end
function+ H.en t.e function in,ol,ed is *n interior one 3li2e P in t.e PMT
function4 * comm* must be put in its position+
1+$! Bi0.est to lo/est r*te of return is *s follo/s> Credit c*rd b*n2 lo*n to ne/
business corpor*te bond 0o,ernment bond interest on c.ec2in0 *ccount
1+$" End of period con,ention me*ns t.*t t.e c*s. flo/s *re *ssumed to .*,e
occurred
*t t.e end of t.e period in /.ic. t.e- too2 pl*ce+
1+!# T.e c*s. flo/ di*0r*m is>

1+!$ ! 5 "'8i
i 5 1); per -e*r
1+!% 'P 5 P = P3#+#(43n4
n 5 '#
Cns/er is 3d4
C.*pter 1 '
P"P#ETAY $ATE#A%+ ? T.e Mc@r*/ABill Comp*nies Inc+ Cll ri0.ts reser,ed+ No p*rt of t.is solution m*- be
displ*-ed reproduced or distributed in *n- form or b- *n- me*ns /it.out t.e prior /ritten permission of t.e publis.er or used
be-ond t.e limited distribution to students te*c.ers *nd educ*tors permitted b- Mc@r*/ABill for t.eir indi,idu*l courses+ Cs *
student -ou *re in,ited to refer to *nd le*rn from t.is solution but -ou s.ould not submit it *s -our o/n /or2 for * course in /.ic.
-ou *re enrolled+ Suc. *ction is considered pl*0i*rism+
# 1 ' $ ! (
P 5 I
<!####
i 5 1(;
1+!& Cns/er is 3c4
C.*pter 1 $
P"P#ETAY $ATE#A%+ ? T.e Mc@r*/ABill Comp*nies Inc+ Cll ri0.ts reser,ed+ No p*rt of t.is solution m*- be
displ*-ed reproduced or distributed in *n- form or b- *n- me*ns /it.out t.e prior /ritten permission of t.e publis.er or used
be-ond t.e limited distribution to students te*c.ers *nd educ*tors permitted b- Mc@r*/ABill for t.eir indi,idu*l courses+ Cs *
student -ou *re in,ited to refer to *nd le*rn from t.is solution but -ou s.ould not submit it *s -our o/n /or2 for * course in /.ic.
-ou *re enrolled+ Suc. *ction is considered pl*0i*rism+