Solution manual intermediate accounting 9e by nicolai appendix d

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com APPENDIX D COMPOUND INTEREST CONTENT ANALYSIS OF EXERCISES AND PROBLEMS Number Content Time Range (minutes) ED-1 Future Value Single investment, compound interest 5-10 ED-2 Future Value Single investment, compound interest 5-10 ED-3 Present Value Single sum, compound discount 5-10 ED-4 Future Value Ordinary annuity, interest compounded annually 5-10 ED-5 Present Value Ordinary annuity and annuity due, interest compounded annually 5-15 ED-6 Amount of Each Cash Flow Future value, interest compounded annually 5-10 ED-7 Amount of an Annuity Various annual withdrawal dates, interest compounded annually 10-15 ED-8 Amount of Each Cash Flow Present value, calculate monthly installments, compound interest 10-15 ED-9 Amount of Each Cash Flow Present value and future value, two sums, interest compounded annually 10-15 ED-10 Amount of an Annuity Different future value dates, amount of deposits, interest compounded annually 10-15 ED-11 Compound Interest Future value and present value, ordinary annuity and annuity due, withdrawal determination 15-20 ED-12 Amount of an Annuity Ordinary annuity Deposits, withdrawals, interest compounded annually 10-15 ED-13 Present Value of Leased Asset Lease payments Annuity due Interest compounded annually 5-10 ED-14 Number of Cash Flows Future value, interest compounded annually 5-10 PD-1 Future Value Various single investments, compound interest 15-30 D-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Number Content Time Range (minutes) PD-2 Present Value Various single sums, compound interest 15-30 PD-3 Future Value Annuity due, ordinary annuity, compound interest 15-30 PD-4 Amount of Each Cash Flow Different present value dates, interest compounded annually 15-25 PD-5 Present Value Ordinary annuity, annuity due, deferred annuity Interest compounded annually 20-30 PD-6 Present Value Ordinary annuity, annuity due, compound interest 20-30 PD-7 Compound Interest Issues Future value, installment determinations 30-40 PD-8 Amount of an Annuity Ordinary annuity, present value, withdrawal determination, interest compounded annually 20-30 PD-9 Amount of Each Cash Flow Numerous first withdrawal dates, future value compound interest 30-40 PD-10 Number of Cash Flows Present value, future value, compound interest 20-30 PD-11 Serial Installments Future value, amounts applicable to interest and principal, interest compounded annually 20-30 PD-12 Determining Loan Repayments Present value, recalculation of cash flow amount, interest compounded annually 20-30 PD-13 Purchase of Asset Alternative financing plans to acquire asset Ordinary annuity, annuity due 30-40 PD-14 Fund to Retire Bonds Ordinary annuity, future value, interest compounded annually 10-20 PD-15 Asset Purchase Price Given future cash inflows, compute purchase price of asset 10-20 PD-16 Acquisition of Asset Compute cost of asset, record purchase, and prepare amortization table for note 20-30 PD-17 Present Value Issues Four different payment plans, determine smallest present value 25-35 PD-18 (AICPA adapted) Comprehensive: Compound Interest Issues Numerous issues solved by using the present value and future value tables 30-45 PD-19 Comprehensive: Various Compound Interest Issues Numerous issues solved by using the present value and future value tables and formulas 30-45 D-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ANSWERS TO QUESTIONS QD-1 Interest is the cost of the use of money over time Interest and the price of any merchandise item are similar because both are costs associated with items acquired by a company QD-2 Simple interest is interest only on the principal amount There is no compounding of interest on "previously earned" interest when computations are based on simple interest Compound interest is interest that accrues on past unpaid accrued interest, as well as on the principal The time value of money is interest This term indicates that a dollar held today is worth more than a dollar to be received a year from now because a dollar today can be invested to earn a return (interest), whereas a dollar received a year from now yields no return during the year This future dollar must have the interest element removed from it to determine its value today Discount Discounting involves finding out what a sum or sums of money in the future is worth today by removing the time value of money Dollars in the future are brought back to the present at some interest rate The higher the interest rate, the lower the present value QD-3 The future amount of tells how much one single monetary unit will accrue to in a given number of periods at a given interest rate The future value of an ordinary annuity of tells how much a series of end-of-the-period deposits of one monetary unit will accrue to at a given periodic interest rate QD-4 Interest Rate Per Period a b c QD-5 9% 4% 1¼% Frequency of Compounding Per Year times times 12 times The future value of is plus the interest compounded at a given interest rate for a given number of periods The present value of is the amount that must be invested today in order to grow to in a given number of periods at a given compound interest rate The present value of tells how much one monetary unit in the future is worth today, given the interest rate and the number of periods The present value of an ordinary annuity of tells how much a series of payments of one monetary unit at the end of each period is worth today, given the interest rate QD-6 The only difference between the future value of an ordinary annuity and the future value of an annuity due is the number of time periods over which interest accrues With the future value of an annuity due, interest accrues for one period after the last cash flow in the series With the future value of an ordinary annuity, interest compounding ends on the date of the last payment D-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com QD-6 (continued) Future value of an {ordinary annuity of cash flows is determined immediately after the last cash flow is made $ $ $ $ * _ * * * Dec 31 Dec 31 Dec 31 Dec 31 Year Year Year Year Future value of an annuity due of cash flows is determined one period after the last { cash flow is made $ $ $ $ * _ * * * Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Year Year Year Year Year Arrows indicate date to which computation applies QD-7 The present value of an annuity due is based on cash payments made at the beginning of each period, and is determined on the date of the first payment The present value of a deferred annuity refers to an annuity where the first payment in the series is postponed for two or more periods in the future Present value of an annuity due of four cash flows $ $ $ $ * _* * _* Jan Jan Jan Jan Year Year Year Year D-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com QD-7 (continued) Present value of an annuity of four cash flows deferred three periods $ $ $ $ _* _ _ _ _* * * Jan Jan Jan Jan Year Year Year Year Jan Year Jan Year Jan Year Jan Year Arrows indicate date to which computation applies QD-8 a Step 1: Compute the present value of at 10% for years, as follows: (1 0.10)4 Step 2: Multiply $10,000 by the answer to step b Step 1: To convert the factor obtained in step above from four periods to five periods, simply divide by 1.10, as follows: (1 0.10)4 1.10 Step 2: Multiply $5,000 by the answer to step c Step 1: Compute the future amount of an ordinary annuity of for five cash flows, at 10%, as follows: (1 0.10)5 0.10 Step 2: Multiply $3,000 by the answer to step QD-9 First, the two desired withdrawals are discounted back to the present at 12% compounded semiannually The sum of the two present values of the withdrawals equals the required deposit Required deposit = [$40,000(pn 8, i 6% )] [$50,000(pn 20, i 6% )] Next, we look in the present value of table to obtain the correct factors D-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com QD-9 (continued) Required deposit = ($40,000 x 0.627412) + ($50,000 x 0.311805) = $25,096.48 + $15,590.25 = $40,686.73 QD-10 All of the factors have two things in common: a 14% interest rate, and 16 periods (cash flows) If the factors given have the same number of time periods and/or cash flows for the same interest rate, the table value classification can be determined without using the table The number given for e is the only table value given less than It must therefore be the present value of The reciprocal of the present value of is the future value of Therefore, a is the future value of (1 ¸ 0.122892 = 8.137249) Of the answers remaining, b c and d., the largest is the future value of an ordinary annuity of and the smallest is the present value of an ordinary annuity of 1, again assuming the same number of cash flows and same interest rate The present value of an annuity due is d because it is equal to the present value of an ordinary annuity of one less period with added to the factor a 8.137249 b 50.980352 c 6.265060 d 7.142168 e 0.122892 QD-11 Table Value Classification Future value of Future value of an ordinary annuity of Present value of an ordinary annuity of Present value of an annuity due of Present value of There are two approaches to the determination of the converted factor for a deferred annuity: Converted factor for present value of a deferred annuity of = (Factor for present value of an ordinary annuity of n cash flows of 1) x (Factor for present value of for period of deferment) The ultimate present value of the deferred annuity is determined by multiplying the above factor by the value of each cash flow Converted factor for present value of a deferred annuity of = (Factor for present value of an ordinary annuity of n + k cash flows of 1) - (Factor for present value of an ordinary annuity of k rents of 1) The ultimate present value of the deferred annuity is determined by multiplying the above factor by the value of each cash flow QD-12 $20,000 present value ¯ $ $ $ * _ _* _* first second third installment installment installment The correct table to use is the present value of an ordinary annuity of table D-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com QD-12 (continued) Table value: Po = 2.321632 n 3,i 14% Equal installments = $20,000 2.321632 QD-13 a Invert the given value, or 4.411435 b Square the given value, or (4.411435)2 c Use the following equation: Given value 0.16 or 4.411435 0.16 d Use the following equation: 1 or Given value 1 4.411435 0.16 0.16 e Use the following equation: (Given value) 0.16 or (4.411435)2 0.16 ANSWERS TO CASES CD-1 Annual cost of the 1-year plan: $4,480.00 Annual cost of the 3-year plan: Pd C(Pdn 3, i 12% ) $11,200 = C (2.690051) C $11,200 $4,163.49 2.690051 Annual cost of the 5-year plan: Pd C(Pdn 5, i 12% ) $17,920 = C (4.037349) D-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CD-1 (continued) C $17,920 4.037349 $4,438.56 The 3-year plan is the least expensive plan given the 12% rate The savings over the other two plans are computed as follows: Yearly savings over the 1-year plan $4,480.00 - $4,163.49 = $316.51 Yearly savings over the 5-year plan $4,438.56 - $4,163.49 = $275.07 CD-2 Plan Purchase the equipment The present value of the purchase alternative equals the sum of the initial cash payment, less the present value of the resale value to be received in years, computed as follows: Initial cash payment Present value of the resale value: P of $5,500 for years at 12%: $5,500 x 0.567427 Total present value $36,800.00 (3,120.85) $33,679.15 Plan Lease the equipment The present value of leasing the equipment equals the present value of $9,100 per year for years, discounted at 12% Since the payments are made at the beginning of each year, this is an annuity due situation Pd C(Pd ) n,i Pd $9,100(Pdn 5, i 12% ) = $9,100 (4.037349) = $36,739.88* *Note that when the equipment is leased, the resale value does not accrue to Taylor Company, hence it is not included in the present-value computation Solution: Taylor Company should purchase the equipment outright, since the purchase option has the lower present value The cash saving is $36,739.88 - $33,679.15 = $3,060.73 Note that this solution ignores other factors such as taxes and risk D-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CD-3 If White takes the discount, it must pay $396,000 By not taking the discount, White can use the $396,000 for 10 days (assuming that White follows its usual policy of paying after 30 days) For waiting the extra 10 days, the company must pay an additional $4,000 The effective annual interest cost is $4,000 360days x $396,000 10days 0.3636 $36.36% The 36.36% rate is compared with the effective annual interest cost of borrowing the money from a bank to see if the discount should be taken The effective annual interest cost of borrowing the funds is computed as shown in the following Since White has to keep a 15% compensating balance in the bank, $396,000 equals only 85% of the funds that must be borrowed, therefore, $396,000 = 0.85 (borrowed amount) $396,000 = borrowed amount 0.85 $465,882.35 = borrowed amount The yearly interest charge on the borrowed amount is 14%, or $465,882.35 x 14% = $65,223.53 The effective rate, however, is higher than 14% Of the amount borrowed ($465,882.35), only $396,000 is usable, due to the 15% compensating balance This means that White is paying $65,223.53 for the use of $396,000 The effective annual interest cost is $65,223.53 = 0.1647 = 16.47% $396,000 Since this rate is lower than the rate for paying after 30 days and not taking the discount, the discount should be taken The effective annual interest cost of not taking the discount is lower in this case, since White could use the $396,000 for 40 days instead of just 10 days The effective annual interest cost of waiting the entire 60-day period is $4,000 360days x $396,000 40days 0.0909 9.09% Since this rate is lower than the effective rate of borrowing from the bank (16.47%) White should not take the discount, and pay at the end of the 60-day period D-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CD-3 (continued) It has become less desirable for White to borrow from the bank By waiting one day, or 40 days past the discount period, White must pay $4,000 more than if the discount were taken The longer White waits to pay, the lower the effective interest cost since White pays the same charge ($4,000), but gets a longer use of the $396,000 Increasing the amount of time funds are used, while keeping the interest charge constant, always lowers the effective interest cost CD-4 The amount of interest earned equals the future value minus the present value, computed as follows: (fn 80,i 4% ) (fn 40,i 4% )2 (4.801021)2 23.049803 f = $1,500,000 (fn 80,i 4% ) f = $1,500,000 (23.049803) f = $34,574,705 Less: Future amount Present value Interest earned $34,574,705 (1,500,000) $33,074,705 If she had invested $10,000 a year instead: Fo C(Fo ) n,i Fo $10,000(Fo ) n 20,i 16% Fo = $10,000 (115.379747) Fo = $1,153,797.47 She would only have about 3% as much money, but would have avoided 20 years in prison CD-5 Either argument may be correct depending on the circumstances If the note was given solely in exchange for cash, then the president is correct However, the requirements of FASB Statement No 57, "Related Party Disclosures," must be considered If the note was given in exchange for property, services, or cash and other considerations, then the accountant is correct The 4% rate charged by the bank is unrealistic, based on the 16% going rate Discounting the note at 16% approximates the market value of the note D-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-9 (continued) Pdeferred = C[(Po ) (Po )] n k 17,i 5% k 9,i 5% $40,000 = C (11.274066 - 7.107822) $40,000 = C (4.166244) C $40,000 4.166244 C = $9,600.97 or Pdeferred = C [(Po )(p )] n 8, i 5% k 9,i 5% $40,000 = C (6.463213)(0.644609) $40,000 = C (4.1662453) C $40,000 4.1662453 C = $9,600.97 PD-10 Fo = C(Fo ) n,i $40,000 = $4,000 (Fo n ?, i 7% $40,000 = Fo n ?, i 7% $4,000 10.000000 = Fo n ?, i 7% D-32 ) To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-10 (continued) (continued) Looking down the 7% column in the table for the future value of an ordinary annuity of 1, we see that 10.000000 is between and cash flows Assuming Houser can make no more than a $4,000 quarterly deposit, this means he will have to make deposits of $4,000 each and an eighth deposit of an amount less than $4,000 To find the amount of the last deposit, we find the future value of an annuity due of deposits of $4,000 at 7% This will tell us the amount in the fund at the end of eight quarters Fd = $ 4,000 (Fd ) n 7, i 7% Fd = $ 4,000 (Fd n 8, i 7% 1) Fd = $ 4,000 (10.259803 - 1) Fd = $ 4,000 (9.259803) Fd = $37,039.21 Subtracting this value from the amount needed ($40,000), we obtain the amount of the last deposit $40,000.00 - $37,039.21 = $2,960.79 Po = C(Po ) n,i $20,000 = $4,000 (Po ) n ?,i 12% 5.000000 = Po n ?,i 12% D-33 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-10 (continued) (continued) Looking down the 12% column in the table for the present value of an ordinary annuity of 1, we see that 5.000000 is between and cash flows Assuming Campbell can make no more than a $4,000 payment, this means she will have to make payments of $4,000 each and a ninth payment of an amount less than $4,000 To find the amount of the last payment, we find the present value of cash flows of $4,000 at 12% This will tell us how much of the principal has been repaid Po = $4,000 (Po ) n ?,i 12% Po = $4,000 (4.967640) Po = $19,870.56 Subtracting this from the original balance ($20,000), we see that $129.44 of the original principal has not been paid Since the $129.44 has been accruing interest for years, the amount of the last payment is f p(fn,i ) f = $129.44 (f n 9,i 12% ) f = $129.44 (2.773079) f = $358.95 PD-11 Present value of remaining obligation $14,400 - $3,000 = $11,400 Since the first payment is not due until one month after the purchase, this is an ordinary annuity D-34 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-11 (continued) (continued) Po = C(Po ) n,i $11,400 = C (Po n 18,i % ) $11,400 = C (15.672561) C $11,400 15.672561 C = $727.39 The amount of interest for each month is 1½% of the beginning of the month balance The remainder of the $727.39 payment is a reduction of the principal Period 1: Interest $11,400 x 1½% = $171.00 Reduction of principal $727.39 - $171.00 = $556.39 Period 2: Remaining principal balance $11,400.00 - $556.39 = $10,843.61 Interest $10,843.61 x 1½% = $162.65 Reduction of principal $727.39 - $162.65 = $564.74 PD-12 Step 1: Find out how much the three $4,000 deposits will accrue to by December 31, 2013 This amount can be solved for as the future value of an annuity left to accrue interest Faccrued C (Fo ) (Fo ) n k 10, i 10% k 7, i 10% Faccrued = $ 4,000 (15.937425 - 9.487171) D-35 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-12 (continued) Faccrued = $ 4,000 (6.450254) Faccrued = $25,801.02 or Faccrued C (Fo )(f ) n 3, i 10% n 7, i 10% Faccrued = $ 4,000 (3.310000)(1.948717) Faccrued = $ 4,000 (6.4502533) Faccrued = $25,801.02 Step 2: Subtract the answer to step from $40,000 to find out the additional amount that will be needed on December 31, 2013 $40,000.00 - $25,801.02 = $14,198.98 Step 3: $14,198.98 is the future value of the seven additional yearly deposits The amount of the yearly deposits can be solved for as an ordinary annuity Fo = C(Fo ) n,i $14,198.98 = C(Fo ) n 7, i 10% $14,198.98 = C (9.487171) C $14,198.98 9.487171 C = $1,496.65 D-36 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-13 Present value of Redd's plan: Pd = C(Pd ) n 5, i 10% Pd = $10,350 (4.169865) Pd = $43,158.10 Present value of Greene's plan: Po = C(Po ) n 10, i 5% Po = $ 5,750 (7.721735) Po = $44,399.98 Redd's plan has the lower present value, and is therefore the least expensive payment plan PD-14 Fo = C(Fo ) n,i $1,000,000 = C(Fo ) n 10, i 12% $1,000,000 = C (17.548735) C $1,000,000 17.548735 C = $56,984.16 D-37 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-15 The maximum amount BWP should be willing to pay is the present value of the net cash inflows discounted at the required rate of return In this case it is $15,805.22, computed as follows: Years Present Values 1-4 5-9 10 10 Present value of the net cash inflows $ 9,112.05a 5,727.25b 643.95c 321.97d $15,805.22 a$3,000 x 3.037349 x 3.604776 x 0.635518 [or $2,500 x (5.328250 - 3.037349)] c$2,000 x 0.321973 d$1,000 x 0.321973 b$2,500 PD-16 The cost of an asset purchased using a debt instrument is the present value of the future cash flows That is, the cost of the machinery is the down payment plus the present value of $1,000 for years at 8%, which is $5,992.71 computed as follows $5,992.71 = $2,000 + ($1,000 x 3.992710) Machinery Cash Notes Payable Period Beginning Balance $3,992.71 3,312.13 2,577.10 1,783.27 925.93 5,992.71 Interesta $319.42 264.97 206.17 142.66 74.07 Cash Payment $(1,000) (1,000) (1,000) (1,000) (1,000) aBeginning balance x 8% bBeginning balance + Interest - Cash payment D-38 Ending Balanceb $3,312.13 2,577.10 1,783.27 925.93 2,000.00 3,992.71 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-17 Plan 1: PV = $600,000 Plan 2: Down Payment 12 payments Po of $65,000 for 12 years at 12%: $65,000 x 6.194374 Total PV $200,000.00 402,634.31 $602,634.31 Plan 3: Down payment $200,000.00 First payments: Po of $25,000 for years at 12%: $25,000 x 2.401831 60,045.78 Next 11 payments: Po of $75,000 for 11 years at 12%: $75,000 x 5.937699 = $445,327.43 p of $445,327.43 for years at 12%: $445,327.43 x 0.711780 316,975.15 Total PV $577,020.93 Plan 4: Pd of $80,000 for 14 years at 12%: $80,000 x (7.423548) $593,883.84 Plan has the lowest present value, and is therefore the least expensive payment plan PD-18 (AICPA adapted solution) Part a Table (Answer) C D Table A: Table B: E C Table C: Table D: A Table E: Table F: Table Titles (Not Required) Present value of $1 Future value of an annuity of $1 in advance (annuity due) Future value of $1 Amount of each cash flow for an ordinary annuity of $1 Present value of an ordinary annuity of $1 Amount of each cash flow for an annuity in advance of $1 D-39 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-18 (continued) Part b $8,275 $22,500 $2,500 $2,500 $2,500 $2,500 $2,500 $? ? ? ? $22,500 = 9.0000 = Factor in annuity table (future value of an annuity of $1) $ 2,500 that indicates the number of payments needed; 9.0000 is more than 7.7156 (6 payments) and less than 9.4872 (7 payments) Assuming Payments Assuming Payments $2,500 x 7.7156 = $19,289.00 Interest at 10% for one period 1,928.90 Balance of fund before final payment Final payment Amount needed $2,500 x 9.4872 $21,217.90 1,282.10* = $23,718 Less: Excess 22,500 $ 1,218 Regular payment $ 2,500 Excess on 7th payment $22,500.00 1,218 Amount of final payment $ 1,282* *The $0.10 difference between these two approaches is due to rounding D-40 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-18 (continued) Part b (continued) $200,000 $20,000 $20,000 $20,000 Total funds needed Value of seven payments of $20,000 (x 9.4872) Deficiency at end of seven years $200,000.00 (189,744.00) $ 10,256.00 Initial deposit required [present value of $10,256.00 at beginning of year period ($10,256 x 0.5132)] = $ PD-19 Fo = C x Fo n 10, i 6% = $5,000 x 13.180795 = $65,903.98 C = = Po Pon 30, i 6% $65,903.98 13.764831 = $4,787.85 D-41 5,263.38 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-19 (continued) (continued) Fo = C x Fo n 10, i 10% = $5,000 x 15.937425 = $79,687.13 C = = Po Pon 30, i 6% $79,687.13 9.426914 = $8,453.15 (a) Years 1-10 $3,000 10 Years 11-20 $5,000 20 Years 21-30 $10,000 30 Fo = C x Fo n 10, i 10% = $3,000 x 15.937425 = $47,812.28 D-42 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-19 (a) (continued) F = P x Fn 20, i 10% = $47,812.28 x 6.727500 = $321,657.11 Fo = P x Fn 10, i 10% = $5,000 x 15.937425 = $79,687.13 F = Px F n 10, i 10% = $79,687.13 x 2.593742 = $206,687.86 Fo = C x Fo n 10, i 10% = $10,000 x 15.937425 = $159,374.25 At the end of 30 years, Jordy will have $687,719.22 ($321,657.11 + $206,687.86 + $159,374.25) in his savings if it earns 10% Fo = C x Fo n 10, i 6% = $3,000 x 13.180795 = $39,542.39 F = Px F n 20, i 6% = $39,542.39 x 3.207135 = $126,817.78 D-43 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-19 (continued) (a) (continued) Fo = C x Fo n 10, i 6% = $5,000 x 13.180795 = $65,903.98 F = Px F n 10, i 6% = $65,903.98 x 1.790848 = $118,024.01 Fo = C x Fo n 10, i 6% = $10,000 x 13.180795 = $131,807.95 At the end of 30 years, Jordy will have $376,649.74 ($126,817.78 + $118,024.01 + $131,807.95) in his savings if it earns 6% (b C = Po Pon 20, i 10% = $687,719.22 8.513564 = $80,779.24 C = Po Pon 20, i 6% = $376,649.74 11.469921 = $32,838.04 D-44 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PD-19 (continued) (continued) (c) P = Fx P n 30, i 10% = $687,719.22 x 0.057309 = $39,412.50 P = Fx P n 30, i 6% = $376,649.74 x 0.174110 = $65,578.49 Value at end = [ P x F n 2x12, i 18% 12 ] - [C x F ] on 2x12, i 18% 12 of year = [$200,000 x 1.429503] - [$2,000 x 28.633521] = $285,900.60 - $57,267.04 = $228,633.56 Value at end =[ P x F n 5x2, i 12% ]-[F ] on 5x2, i 12% of year = [$228,633.56 x 1.790848] - [$6,000 x 13.180795] = $409,447.95 - $79,084.77 = $330,363.18 C = Annuity = Po Pon 15, i 10% $330,363.18 7.60608 = $43,434.09 D-45 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com D-46 ... $10,000 by the answer to step b Step 1: To convert the factor obtained in step above from four periods to five periods, simply divide by 1.10, as follows: (1 0.10)4 1.10 Step 2: Multiply $5,000 by. .. slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com D-12 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com SOLUTIONS TO... slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com D-22 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com SOLUTIONS TO