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Chapter 2 Problems - Answers

1. 1.65%
2. a. IP = 1.00%
b. ij* = 6.65%
3. 1R2 = =7.085%
4. 1R1=6%
1R2 = 6.449%
1R3 = 6.832%
1R4 = 7.085%
5. 1R2 = 3.55%
6. E(2r1) = .12 = 12%
7. 1R1 = .1826 = 18.26%
8. E(5r1) = 8.379%
9. E(4r1) = 3.657%
E(5r1) = 4.514%
E(6r1) = 4.611%
10. 1R1 = 5.65%
1R2 = 6.223%
1R3 = 6.465%
1R4 = 6.666%
11. L2= .08145 = 8.145%
12. L4 = .001536 = 0.1536%
13. 7.51%
14. 14.18%
15. 2f1=5.15%
3f1= 5.85%
4f1= 6.86%
16. 4f1 = 7.41%
5f1 = 7.86%
6f1 = 7.85%
17. 1R1 = 4.5%

51 PV = $5. PV = $3.59 d.736.052.061.84 24.01 FV = $313. PV = $3. FV= $28.618.19 c. PV = $3. PV= $85.15 25.683.05 FV = $417.25 FV = $15.94 PV = $39.585.64 c.876.15 PV = $20.051.57 e.74 PV = $49.46 b. FV = $117.08 20 a. PV = $3. FV = $7. FV= $29.211.843. a.346.53 d.144.711.069.82 b.325.65 FV = $251. PV= $21.934.29 b. FV = $8.219.767. FV = $4. FV = $179. FV = $8. a.696. a.38 .61 22.823.691.01% 1R3 = 9. PV = $3.1R2 = 6. PV = $87.50 23. FV $8.817.04% 18.63 FV = $201.193.788.11 FV = $925. FV = $6.34 c. FV = $115.362.01 PV = $36.61 d.130. PV = $55.84 21. PV = $12.842.729.185. PV = $22.104.35 19.92 c.13 b.47 e.55 d.198.402.352.

84 FV = $52.519. PV = $55.167.54 PV = $49.83 FV $454.55 34.946.40 FV =$1.79 PV = $70.48 PV = $74.583.49 PV = $194. FV = $155.012.93 PV = $3. . 32. the interest portion is $95.282.863.28 FV = $163.654.12 FV = $4.15 PV = $31.388.688.10)4 = $8.93 years 35.330. I = 8.10 31.449. N = 4.43.595.560.08 26.325.37 PV = $39.55 PV = $314. PV = $2.95 27.052.772.57 FV = $48.470.161.35 FV = $182.50 FV = $1.91 PV = $301. FV = $500 (1.879.76%.540.54 29.287.98 28.51 = $595.011.934.567.51.51 − $500. So.PV = $31. 36 PV =$3.205.04 FV = $204.500×(1.06 33. FV = $3.06)3 = $595.94 PV = $148.998.844. PV $1.27 FV = $500.193.79 30 FV =$45.006. FV = $5.732.

I = 7. . or 3. 40.61. loan B is the better offer because the EAR on B < the EAR on A.61 x (1+0. FV =$7. 39. 41.36% 43. EAR = 10. EAR on A =8.720.436% EAR on B = 8. EAR =12.10) = $8.715.17. N = 45 months. PMT = $1. then multiply $7.420% So.715.17.487.68% 42.73 years.37.84%. 38.