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rieworR.CHapter T Homework re: 5 of 10 pts P7-4 (book/static) ㄇ HW Score: 52 78%, 31 67 of 6 (Click the icon to view the Future alue of $1 table) (Click the icon to view the Future Value of an Odnary Annuity table) (Cick the icon to view the Future Value of an Annuity Due table ) 悬 (Cick the icon to view the Present Value 0, $1 table」 questions) (Use the present value and future value tables, the formula mothod, a financial calculator, or a spreadsheet or your calculations If using present and future value tables or the formula method, use factor amounts Click the kcon to viow the Present Value of an Ordna Annuity table) – (Click the icon to view the Present Value of an Annuilty Due table ) a. You borrowed $15,000 from a friend and promised to repay the loan in seven equal annuaalments Instalments begin who would like to earn 4% annual interest compounded annually? Round your final answer to the nearest cent xxx) at the end of the first year. What are the annual payments required to pay back your fhiene are S 2.499 14 Assurme no interest will accrue on the debt it has S50 to invest in a fund eaning 5% Henest compounded annualy How many years wil r take has an to earn enough money to pay back the debt? Round your inal answer the nearest whol, number c. Zenith & Co purchases jewelry from a supplier for $60,020.50 Zenith uses a note to pay for the jewelry that requires the year What interest rate is used in this agreement? Round your tinal answer to the nearest whole percent, X The interest rate used in this agreement is [ Enter any number in the edit fields and then click Check Answer part /20/2017
Expert Answer
| a) | The equal annual instalment is an annuity and the Loan amount is its PV at 4%. | ||
| So $15000 = Annual instalment*PVIFA(4,7) = Annual instalment*6.00205 | |||
| Annual instalment = 15000/6.00205 = | $ 2,499.15 | Answer | |
| b) | Here, $89800 is the FV of the lump sum amount of $50000 in hand today. The | ||
| interest rate is 5%; but the number of years required for $50000 to become | |||
| $89800 is not given. It is to be found out. | |||
| We have the equality | |||
| 89000 = 50000*FVIF(5,n) | |||
| Solving for n | |||
| 1.78 = FVIF(5,n) | |||
| From the FVIF table, we have | |||
| Interest factor for 5% and 12 years = 1.7959 | |||
| for 11 years = 1.7103 | |||
| for 13 years = 1.8856 | |||
| Nearest value to 1.78 is 12 years | |||
| Answer: 12 years | |||
| c) | Here, $60020.50 = 10000*PVIFA(r,7) | ||
| r, the interest rate is unknown and is to be solved. | |||
| 6.00205 = PVIFA(r,7) | |||
| From the PVIFA table, the factor for 7 years of 6.00205 is for 4% | |||
| Hence, the interest rate used in the agreement = 4% (Answer) | |||
