Secure l https:// heducation.com/flow/connect.html ck access, place your bookmarks here on the bookmarks bar. Import boolomarks CH6 Homework 6 Help Save& Extt Submit Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicete completion. 6 Return to questlion The following situations should be considered independently EV of $1. PY of $1. EVA of $1. PVA of $1. EVAD of $1 and (Use appropriate factor(s) from the tables provided.) PVAD of SD 71 ints 1. John Jamison wants to accumulate $68.205 for a down payment on a small business. He will Invest $35.000 today in a bank account paying 10% interest compounded annually Approximately how long will it take John to reach his goal? 2. The Jasmine Tea Company purchased merchandise from a supplier for $37698. Payment was a noninterest-bearing note requiring Jasmine to make seven annual payments of $8,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement? 3. Sam Robinson borrowed $19.000 from a friend and promised to pay the loan in 10 equal annual installments beginning one year from the date of the loan. Sam\'s friend would like to be reimbursed for the time value of money at an 11% annual rate. What is the annual payment Sam must make to pay back his friend? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below.
Solution 1:
Accumlation value = $68,205
Principal amount to be invested = $35,000
rate of interest = 10%
Let it will take t years to accumlated required amount.
therefore
p(1+r)^t = $68,205
35000 (1+.10)^t = $68,205
(1.10)^t = 1.9487
From CI table compound value 1.9487 at 10% is available in 7 years.
Hence 7 year required to john for accumlating $68,205.
Solution 2:
Purchase price = $37,698
Annual installment = $8,000
Period = 7 years
Let r is implicit rate of return, hence
Present value of installment at r rate will be $37,698
$8,000 * cumulative PV factor at r rate for 7 years = $37,698
Cumulative PV factor at r rate for 7 year = 4.71225
From PV table, cumulative PV factor 4.71225 at 7 period is for 11% rate of return
Hence implicit rate of return is 11%
Solution 3:
Loan amount = $19,000
Payment terms = 10 year annual equal instalments at the end of year
rate of interest = 11%
Let a is the annual equal installment. Hence present value of annual installment at 11% rate will be equal to amount of loan
Therefore
a * cumulative PV factor at 11% for 10 period = $19,000
a*5.8892 = $19,000
a = $3,226
Hence SAM to pay equal annual installment of $3,226 for 10 years for reimbursing 11% return.
Homework Sourse
