5.

11

VN = $10,000 (P/F, 1.75%, 120) + $150 (P/A, 1.75%, 120) = $10,000 (0.1247) + $150 (50.0171)

= $8,750

The worth of Jim’s bonds had dropped by $1,250 because of the increase in the marketplace interest
rates for long-term debt. With bonds, as the interest rate in the economy goes up, the value of the bond
decreases and vice versa.

5.16

$ 1,500
a) CW(10%) = + [ $ 10,000(A/F, 10 % , 4 ¿ ¿¿ 0.1 ] ( P/F, 10 % , 1 )=$ 34,591
0.1
1
b) We have (A/P,i%,N) = A( )
i
 (A/P,i%,N) = i

 (A/P,10%,N) = 0.1

From Table C-13, N = 80 years