Question

Find the present value at j₁ = 7% of $5000 due at the end of 20 years, if (a) the payment is certain to be made; (b) the payment is contingent on the survival of a male now aged 30. Ans; (a)$1292.10; (b) $1209.37

Answer 1

ncise sharewe knouw vcmiat Algebraic Method Rearranging the basic equation FV = PV(I + i)" to isolate i is more difficult than isolating PV First divide both sides of the equation by PVand then interchange the two sides, giving FV (1 + i)" =PV i), Next take the ith root of both sides of the equation. This makes the left side simply (1 and we have FV Therefore, (9-1) V PV

Page: DateI PV -Wen ↓formale (1+0-07) 20 3-8696 1292-092 1222-10)
my book next example
● EXAMPLE 9.1B | CALCULATING A SEMIANNUALLY COMPOUNDED RATE OF RETURN Mr. Dunbar paid $10,000 for a S40,000 face value strip bond having 19 years remaining until maturity. (Recall that a strip bond is an investment that returns just one payment, the face value, at maturity.) What semiannual ly compounded rate of return wll Mr. Dunbar earn on his investment? SOLUTION Given:pV= $10,000 FV= $40,000 Term=191years m=2 Then Term) 2(19.5)-39 |PY 2 ENTER PV $40,000、1/39 $10,000 (making C/Y P/Y = 2) 39 N 10000 PV = 40.0256410- ol PMT 40000 Fv CPT Y 0.036185 = 3.6185% Ans: 7.237 j mi 2(3.6185%) 7.24% compounded semiannually Mr. Dunbar will earn 7.24% compounded semiannually on his strip bond investment.
not same part b