Question

1. Mark Welsch deposits $7,100 in an account that earns interest at an annual rate of 8%, compounded quarterly. The $7,100 plus earned interest must remain in the account 5 years before it can be withdrawn. How much money will be in the account at the end of 5 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1)

2. Dave Krug finances a new automobile by paying $6,800 cash and agreeing to make 10 monthly payments of $500 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobile? (PV of $1, FV of $1, PVA of $1, and FVA of $1

	Monthly Payment Table Factor = Present Value of Loan = Table Values are Based on: n = i = Present Value of Loan Cash Down Payment = Cost of the Automobile =

3. Otto Co. borrows money on April 30, 2016, by promising to make four payments of $22,000 each on November 1, 2016; May 1, 2017; November 1, 2017; and May 1, 2018. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.)
How much money is Otto able to borrow if the interest rate is 4%, compounded semiannually?

4.

Compute the amount that can be borrowed under each of the following circumstances: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places.)

1. A promise to repay $90,000 five years from now at an interest rate of 7%.
2. An agreement made on February 1, 2016, to make three separate payments of $17,000 on February 1 of 2017, 2018, and 2019. The annual interest rate is 3%

5. Kelly Malone plans to have $43 withheld from her monthly paycheck and deposited in a savings account that earns 12% annually, compounded monthly. If Malone continues with her plan for two and one-half years, how much will be accumulated in the account on the date of the last deposit? (PV of $1, FV of $1, PVA of $1, and FVA of $1)

6. Starr Company decides to establish a fund that it will use 2 years from now to replace an aging production facility. The company will make a $105,000 initial contribution to the fund and plans to make quarterly contributions of $45,000 beginning in three months. The fund earns 8%, compounded quarterly. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table Factor" to 4 decimal places and final answer to the nearest whole dollar.)

What will be the value of the fund 2 years from now?

Answer 1

1.

FV = PV (1+i)^n

Given PV = $7100

n = 20 quarters

i = 8% p.a

=> Quarterly Compounding = 2%

= $ 7100 (1+.02)^20

=$7100 x 16.35 = $116085

2.

Month	Amount Paid	PV Factor @1%	DCF
M0	-6,800	1.00	-6,800.00
M1	-500	0.99	-495.05
M2	-500	0.98	-490.15
M3	-500	0.97	-485.30
M4	-500	0.96	-480.49
M5	-500	0.95	-475.73
M6	-500	0.94	-471.02
M7	-500	0.93	-466.36
M8	-500	0.92	-461.74
M9	-500	0.91	-457.17
M10	-500	0.91	-452.64
Net Cash Outflow	-11,800		-11,535.65

Monthly Payment	$500
Table Factor	1% , 10 payments
NPV of Loan	4735
n =	10
i =	1% p.m
PV factor	9.47
Cash Down Payment	6800
Cost of Automobile	11535

3. The maximum loan amount that can be given will be $83,983

Below is the loan computation table basis 2% interest (4% interest rate - semiannual effect)

All amounts in US$

Half Year Date	Amount Paid	PV Factor @2%	DCF
Nov 1 2016	22,000	0.9901	21,782.1782
May 1 2017	22,000	0.9612	21,145.7132
Nov 1 2017	22,000	0.9423	20,731.0914
May 1 2018	22,000	0.9238	20,324.5994
Total	88,000	NPV	83,983.5821

4.

a.

Total Repayment	$90000
Table Factor	7%
n =	5
i =	7% p.a

Amount in US$

Payment Dates	Amount Paid	PV Factor @7%	DCF
Y1	18000	0.93	16,822.43
Y2	18000	0.87	15,721.90
Y3	18000	0.82	14,693.36
Y4	18000	0.76	13,732.11
Y5	18000	0.71	12,833.75
Total	90000	NPV	73803.5538

The maximum amount that can be borrowed is $73803.5538

b.The maximum amount that can be borrowed is $49029.02

Payment Dates	Amount Paid	PV Factor @12%	DCF
Feb 1 2017	17000	0.97	16,504.85
Feb 1 2018	17000	0.94	16,024.13
Feb 1 2019	17000	0.97	16,500.03
Total	51000	NPV	49,029.02

5.

FV = P [ ((1+r)^n-1)/r]

Given P = $43

n = 36 months

r = 1% p.a

= $ 43 ((1+.01)^36 -1 )/ 1%

=$1852.3058