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Exercise 6-2
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Lyle O'Keefe invests $30,300 at 10% annual interest, leaving the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Lyle withdrew the accumulated amount of money.
(a) Compute the amount Lyle would withdraw assuming the investment earns simple interest. (Round answers to 0 decimal places, e.g. $458,581.)
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Total withdrawn
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$
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(b) Compute the amount Lyle would withdraw assuming the investment earns interest compounded annually. (Round answers to 0 decimal places, e.g. $458,581.)
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Total withdrawn
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$
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(c) Compute the amount Lyle would withdraw assuming the investment earns interest compounded semiannually. (Round answers to 0 decimal places, e.g. $458,581.)
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Total withdrawn
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$_
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6-5
Using the appropriate interest table, compute the present values of the periodic amounts, due at the end of the designated periods.
(a) $50,980 receivable at the end of each period for 7 periods compounded at 11%. (Round answers to 0 decimal places, e.g. $458,581.)
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(b) $50,980 payments to be made at the end of each period for 16 periods at 9%.(Round answers to 0 decimal places, e.g. $458,581.)
$_
(c) $50,980 payable at the end of the seventh, eighth, ninth, and tenth periods at 11%. (Round answers to 0 decimal places, e.g. $458,581.)
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Exercise 6-6
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Presented below are three unrelated situations.
(a) Ron Stein Company recently signed a lease for a new office building, for a lease period of 12 years. Under the lease agreement, a security deposit of $13,830 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires? (Round answers to 0 decimal places, e.g. $458,581.)
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$
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(b) Kate Greenway Corporation, having recently issued a $20,090,000, 15-year bond issue, is committed to make annual sinking fund deposits of $612,800. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds?
Yes/ no
If not, what will the deficiency be? (Round answers to 0 decimal places, e.g. $458,581.)
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$
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(c) Under the terms of his salary agreement, president Juan Rivera has an option of receiving either an immediate bonus of $56,000, or a deferred bonus of $105,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?
Accept bonus now/or accept deferred bonus in 10 yrs
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Exercise 6-10
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Consider the following independent situations.
(a) Mark Yoders wishes to become a millionaire. His money market fund has a balance of $317,283 and has a guaranteed interest rate of 11%. How many years must Mark leave that balance in the fund in order to get his desired $1,000,000?
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years
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(b) Assume that Elvira Lehman desires to accumulate $1 million in 19 years using her money market fund balance of $194,490. At what interest rate must Elvira's investment compound annually? (Round answer to 0 decimal places, e.g. 5%.)
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Interest rate
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%
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