To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser.If she begins saving today, and sticks to her plan, she will have saved 1,487,261.89 by the time she reaches 65 With a financial calculator, enter the following inputs: N 45, IYR 12, PV 0, PMT -1095, then press the FV button to solve for 1,487,261.89 H (2) If a 40-year-old investor began saving in this manner, how much would he have at age 65 ANSWER: Show S5-22 here.This question demonstrates the power of compound interest and the importance of getting started on a regular savings program at an early age The 40-year old investor will have saved only 146,000.59 by the time he reaches 65 With a financial calculator, enter the following inputs: N 25, IYR 12, PV 0, PMT -1095, then press the FV button to solve for 146,000.59 H (3) How much would the 40-year-old investor have to save each year to accumulate the same amount at 65 as the 20-year-old investor ANSWER: Show S5-23 here.
Fundamentals Of Financial Management Answers Upgrade Your BrowserHere we have an uneven cash flow stream The most straightforward approach is to find the PVs of each cash flow and then sum them as shown below: 10 90.91 247.93 225.39 (34.15) 530.08 100 300 300 Years -50 Note that the 50 Year outflow remains an outflow even when discounted There are numerous ways of finding the present value of an uneven cash flow stream But by far the easiest way to deal with uneven cash flow streams is with a financial calculator Calculators have a function that on the HP-17B is called CFLO, for cash flow. Fundamentals Of Financial Management Answers How To Use ThemOther calculators could use other designations such as CF0 and CFj, but they explain how to use them in the manual Anyway, you would input the cash flows, so they are in the 106 Integrated Case Chapter 5: Time Value of Money calculators memory, then input the interest rate, IYR, and then press the NPV or PV button to find the present value J (1) Will the future value be larger or smaller if we compound an initial amount more often than annually (e.g., semiannually, holding the stated (nominal) rate constant) Why ANSWER: Show S5-26 here. Accounts that pay interest more frequently than once a year, for example, semiannually, quarterly, or daily, have future values that are higher because interest is earned on interest more often Virtually all banks now pay interest daily on passbook and money fund accounts, so they use daily compounding J (2) Define (a) the stated (or quoted or nominal) rate, (b) the periodic rate, and (c) the effective annual rate (EAR or EFF) ANSWER: Show S5-27 and S5-28 here. The quoted, or nominal, rate is merely the quoted percentage rate of return, the periodic rate is the rate charged by a lender or paid by a borrower each period (periodic rate INOMM), and the effective annual rate (EAR) is the rate of interest that would provide an identical future dollar value under annual compounding J (3) What is the EAR corresponding to a nominal rate of 10 compounded semiannually Compounded quarterly Compounded daily ANSWER: Show S5-29 through S5-31 here. PMT 65, 155.79, at an interest rate of 8 Set the calculator to BEG mode, then enter N 25, IYR 8, PMT 651 55. FV 0, and press PV to get PV 751,1 65. This amount must be on hand to make the 25 payments 5 Since the original 100,000, which grows to 2 15, 892.50, will be available, we must save enough to accumulate 751,1 65. Chapter 5: Time Value of Money. Design by 123DOC.
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