Stice 18e SOL Final

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TIME VALUE OF MONEY REVIEW MODULE

EXERCISES
M1.
M2.
$67,200 [$60,000 + ($60,000 0.12 1 year)]

$7,200 ($67,200 $60,000)
$70,800 [$60,000 + ($60,000 0.12 18/12)]
1.
a.
b.
c.
2.
$71,232 [$67,200 + ($67,200 0.12 6/12)]
3.
In (1c) simple interest is computed, whereas in (2) interest is compounded annually. The answer in (2) is greater because Dietrick Corporation is paying interest on the interest accumulated in Year 1. The
difference between (1) and (2) of $432 can be computed as being the
interest for 6 months on the $7,200 interest for the first year ($7,200
0.12 6/12).
1.
$17,805 ($10,050 1.7716, Table I), or ($10,050 0.5645, Table II)

Business Calculator Keystrokes:
10050Press PV
6Press N
10Press I
Press FV for the answer = $17,804.1881 = $17,804 (rounded)
Excel Spreadsheet Function:
Using the FV spreadsheet function:
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.10
6
0
10050
0
Press Enter to see the answer of $17,804.

2.
$2,120 ($650 3.2620, Table 1), or ($650 0.3066, Table II)

650Press PV
40Press N
3Press I
TVM-1
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TVM-2
M2.
Time Value of Money Module
(Continued)
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.03
40
0
650
0

3.
$16,756 ($5,000 1.8106 = $9,053; $9,053 1.8509, Table I), or

($5,000 0.5523 = $9,053; $9,053 0.5403, Table II)
5000Press PV
4Press N
16Press I
9053Press PV
8Press N
8Press I
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.16
4
0
5000
0

Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.08
8
0
9053
0
M2.
TVM-3
(Concluded)
4.
$3,536 ($1,000 1.4802 = $1,480; $1,480 + $1,000 = $2,480; $2,480

1.4258, Table 1), or ($1,000 0.6756 = $1,480; $1,480 + $1,000 = $2,480;
$2,480 0.7014, Table II)
1000Press PV
10Press N
4Press I
2480Press PV ($1,480 + $1,000 additional investment)
12Press N
3Press I
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.04
10
0
1000
0

Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.03
12
0
2480
0

M3.
1.

17000Press FV
20Press N
3Press I
Press PV for the answer = $9,412.4878 = $9,412 (rounded)
TVM-4
M3.
(Continued)
Using the PV spreadsheet function:
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.03
20
0
17000
0

2.

5000Press FV
10Press N
2Press I
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.02
10
0
5000
0

3.
$1,987 ($25,000 2.1911 = $11,410; $11,410 5.7435, Table I), or

($25,000 0.4564 = $11,410; $11,410 0.1741, Table II)
25000Press FV
20Press N
4Press I
11410Press FV
30Press N
6Press I
M3.
TVM-5
(Continued)
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.04
20
0
25000
0

Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.06
30
0
11410
0

4.
$3,856 ($12,500 1.2653 = $9,879, Table I), or ($12,500 0.7903 =

$9,879, Table II) ($9,879 $5,000 = $4,879; $4,879 1.2653, Table 1), or
($4,879 0.7903, Table II)
12500Press FV
6Press N
4Press I
4879Press FV ($9,879 $5,000 additional investment)
6Press N
4Press I
TVM-6
M3.
(Concluded)
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.04
6
0
12500
0

Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.04
6
0
4879
0

M4.
1st Alternative = $14,641 ($10,000 1.4641, Table 1), or

($10,000 0.6830, Table II)
10000Press PV
4Press N
10Press I
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.10
4
0
10000
0
M4.
TVM-7
(Concluded)
2nd Alternative = $13,728 ($10,000 1.3728, Table I), or
($10,000 0.7284, Table II)
10000Press PV
16Press N
2Press I
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.02
16
0
10000
0

M5.
$2,499 ($30,000 12.0061, Table III)

30000Press FV
10Press N
4Press I
Press PMT for the answer = $2,498.72833 = $2,499 (rounded)
Using the PMT spreadsheet function:
Excel Label
Rate
Nper
Pv
Fv
Type
Your Input
0.04
10
0this amount would represent
a separate, initial payment in
addition to the regular payments
30000
0
TVM-8
M6.
1.
14 periods, 7 years ($10,000 $5,051 = 1.9798, Table I), or

($5,051 $10,000 = 0.5051, Table II)
5051Press PV (enter as a negative number, signifying an initial
cash outflow)
10000Press FV
5Press I
Press N for the answer = 13.9987 periods = 14 periods (rounded)
Using the NPER spreadsheet function:
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.05
0
5051 (input as a negative number to
signify an initial cash outflow)
10000
0
Press Enter to see the answer of 14 periods.

2.
9 periods, 9 years
($10,000 $5,002 = 1.9992, Table I), or

($5,002 $10,000 = 0.5002, Table II)

cash outflow)
10000 Press FV
8Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.08
0
10000
0
M6.
TVM-9
(Concluded)
3.
17 periods, 4 years ($10,000 $5,134 = 1.9478, Table I), or

($5,134 $10,000 = 0.5134, Table II)
cash outflow)
10000Press FV
4Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.04
0
10000
0

M7.
1.
8% ($50,000 $10,414 = 4.8012, Table I), or

($10,414 $50,000 = 0.2083, Table II)
cash outflow)
50000Press FV
40Press N
Press I for the answer = 4.0001% = 4% (rounded) 2 = 8%
Using the RATE spreadsheet function:
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
40
0
50000
0
Press Enter to see the answer of 4% 2 = 8%.
TVM-10
M7.
(Concluded)
2.
20% ($50,000 $7,102 = 7.0403, Table I), or

($7,102 $50,000 = 0.1420, Table II)
cash outflow)
50000Press FV
40Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
40
0
50000
0

3.
4% ($50,000 $33,778 = 1.4803, Table I), or

($33,778 $50,000 = 0.6756, Table II)
cash outflow)
50000Press FV
10Press N
Press I for the answer = 4.00006% = 4% (rounded)
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
10
0
50000
0
Press Enter to see the answer of 4%.
M8.
1.
TVM-11
3 periods, 3 years ($20,000 $5,927 = 3.3744, Table III)

5927Press PMT (enter as a negative number, signifying a continuing cash outflow)
20000Press FV
12Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.12
signify regular cash outflows)
0
20000
0

2.

20000Press FV
8Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.08
0
20000
0
TVM-12
M8.
(Concluded)
3.
4 periods, 1 year ($20,000 $4,640 = 4.3103, Table III)

20000Press FV
5Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.05
0
20000
0

M9.
1.
10% annual rate ($25,000 $4,095 = 6.1050, Table III)

25000Press FV
5Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
5
0
25000
0
M9.
TVM-13
(Concluded)
2.

25000Press FV
4Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
4
0
25000
0

3.

25000Press FV
12Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
12
0
25000
0
TVM-14
M10.
1.
$228 ($2,410 10.5753, Table IV)

2410Press PV
12Press N
2Press I
Press PMT for the answer = $227.8886 = $228 (rounded)
Excel Label
Rate
Nper
Pv
Fv
Type
Your Input
0.02
12
2410
0this amount would represent a final
balloon payment to be made at the end
of the loan period, in addition to the
regular payments
0
Press Enter to see the answer of $228.

2.
$1,957 ($26,565 13.5777, Table IV)

26565Press PV
16Press N
2Press I
Excel Label
Rate
Nper
Pv
Fv
Type
Your Input
0.02
16
26565
0this amount would represent a final
balloon payment to be made at the end
of the loan period, in addition to the
regular payments
0
M10.
TVM-15
(Concluded)
3.
$5,256 ($65,500 12.4622, Table IV)

65500Press PV
20Press N
5Press I
Excel Label
Rate
Nper
Pv
Fv
Type
Your Input
0.05
20
65500
0this amount would represent
a final balloon payment to be
made at the end of the loan period, in addition to the regular
payments
0

M11.
1.

3000Press PV
40Press N
4Press I
Excel Label
Rate
Nper
Pmt
Pv
Type
Your Input
0.04
40
0
3000
0
TVM-16
M11.
(Continued)
2.
$10,747 ($1,000,000 93.0510, Table I), or

$10,700 ($1,000,000 0.0107, Table II)
1000000Press FV
40Press N
12Press I
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.12
40
0
1000000
0

3.
n = 25 ($100,000 $16,401.24 = 6.0971, Table IV)

16401.24Press PMT (enter as a negative number, signifying a continuing cash outflow)
100000Press PV
16Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.16
16401.24 (input as a negative
number to signify regular cash
outflows)
100000
0
0
M11.
TVM-17
(Concluded)
4.
8% ($21,589 $10,000 = 2.1589, Table I), or

($10,000 $21,589 = 0.4632, Table II)
cash outflow)
21589Press FV
10Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
10
0
10000 (input as a negative
number to signify an initial cash
outflow)
21589
0

M12.
1.
$4,438 ($20,000 4.5061, Table III)

20000Press FV
4Press N
8Press I
Excel Label
Rate
Nper
Pv
Fv
Type
Your Input
0.08
4
0
20000
0
TVM-18
M12.
(Continued)
2.
35 payments ($15,850 $585 = 27.0940, Table IVThe annuity factor

for 1.5% lies between the factors for 1 and 2% where n = 35)
585Press PMT (enter as a negative number, signifying a continuing
cash outflow)
15850Press PV
1.5Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.015
15850
0
0

3.
Approximately 12% annually, compounded semiannually

($7,726 $250 = 30.9040, Table III)
250Press PMT (enter as a negative number, signifying a continuing
cash outflow)
7726Press FV
18Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
18
0
7726
0
M12.
TVM-19
(Concluded)
4.

50445Press FV
12Press I
Excel Label
Rate
Pmt
Pv
Fv
Type
Your Input
0.12
0
50445
0

M13.
4% ($2,500 $2,404 1.0400, Table I), or ($2,404 $2,500 = 0.9616, Table II)
Annual Rate = 4% 2 = 8%
2404Press PV (enter as a negative number, signifying an initial cash
outflow)
2500Press FV
1Press N
Excel Label
Nper
Pmt
Pv
Fv
Type
Your Input
1
0
2500
0
TVM-20
M14.
Option A = $40,879 ($5,700 3.3121 = $18,879, Table IV; $18,879 + $22,000)

5700Press PMT
4Press N
8Press I
Press PV for the answer = $18,879.1230 = $18,879 (rounded) + $22,000 =
$40,879
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.08
4
5700
0
0
Press Enter to see the answer of $18,879 + $22,000 = $40,879.

Option B = $39,809 ($9,000 3.3121 = $29,809, Table IV; $29,809 + $10,000)
9000Press PMT
4Press N
8Press I
Press PV for the answer = $29,809.1416 = $29,809 (rounded) + $10,000 =
$39,809
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.08
4
9000
0
0
Press Enter to see the answer of $29,809 + $10,000 = $39,809.

Other things being equal, Foot Loose should purchase from Do-It-Yourself
Machines (Option B).
M15.
TVM-21
Plan A = $13,311 ($15,000 0.8874, Table II)

15000Press FV
12Press N
1Press I
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.01
12
0
15000
0

Plan B = $13,506 ($1,200 11.2551, Table IV)
1200Press PMT
12Press N
1Press I
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.01
12
1200
0
0

Other things being equal, Park City should choose Plan B because it would
earn slightly more rent revenue. However, the cost of processing monthly
checks might exceed the extra revenue received.
TVM-22
M16.
1.
a.
1 (1 + 0.01)
120
= 69.7005;
$300,000
=
69.7005
$300,000
= $55,287.31
5.4262
0.01
b.
1 (1 + 0.13)
10
5.4262;
0.13
2.
$4,304.13
The effective annual interest rate associated with the mortgage involving monthly payments is 12.68% = 1.0112 (see Table III, column 1%,
row 12), while the rate associated with the mortgage involving annual
payments is 13%. Thus, the Shrubs would be better off to take the 12%
mortgage with monthly payments.
Another way to illustrate the difference is to compute the future value
of the 12 monthly payments and compare that to the annual payment
of $55,287.31. The monthly payment of $4,304.13 12.6825 (Table III) =
$54,587.13 is less than the annual payment of $55,287.31.
M17.
Plan A
= $375
Plan B
= $402.90 ($55 7.3255, Table IV)

55Press PMT
8Press N
2Press I
Press PV for the answer = $402.9015 = $402.90 (rounded)
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.02
8
55
0
0
Press Enter to see the answer of $402.90.

Plan C
= $380.07 [$100 + ($50 5.6014, Table IV)]

50Press PMT
6Press N
2Press I
Press PV for the answer = $280.0715 = $280.07 (rounded) + $100.00 =
$380.07
M17.
TVM-23
(Concluded)
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.02
6
50
0
0
Press Enter to see the answer of $280.07 + $100.00 = $380.07.

If you were the purchaser, you would choose Plan Apay $375 cash for the
new freezer. If you were the seller, you would want the customer to choose
Plan B8 monthly payments of $55.
M18.
$92,517 ($28,000 5.5824 = $156,307, Table IV; $156,307 1.6895 = $92,517,

Table 1), or ($28,000 5.9173 = $165,684, Table VI; $165,684 0.5584 =
$92,518, Table II)
28000Press PMT
7Press N
6Press I
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.06
7
28000
0
0

This yields the present value of the annuity 1 period before the first payment is made. To calculate the present value now, the sum must be discounted 9 more periods.
156,307Press FV
9Press N
6Press I
TVM-24
M18.
(Concluded)
Excel Label
Rate
Nper
Pmt
Fv
Type
Your Input
0.06
9
0
156,307
0

Stice 18e SOL Final

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Stice 18e SOL Final

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To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.

TIME VALUE OF MONEY REVIEW MODULE

$67,200 [$60,000 + ($60,000 0.12 1 year)]

$71,232 [$67,200 + ($67,200 0.12 6/12)]

$17,805 ($10,050 1.7716, Table I), or ($10,050 0.5645, Table II)

Press Enter to see the answer of $17,804.

$2,120 ($650 3.2620, Table 1), or ($650 0.3066, Table II)

Time Value of Money Module

Press Enter to see the answer of $2,120.

$16,756 ($5,000 1.8106 = $9,053; $9,053 1.8509, Table I), or

Press Enter to see the answer of $9,053.

Press Enter to see the answer of $16,756.

$3,536 ($1,000 1.4802 = $1,480; $1,480 + $1,000 = $2,480; $2,480

Press Enter to see the answer of $1,480.

Press Enter to see the answer of $3,536.

$9,413 ($17,000 1.8061, Table I), or ($17,000 0.5537, Table II)

Time Value of Money Module

Press Enter to see the answer of $9,412.

$4,102 ($5,000 1.2190, Table I), or ($5,000 0.8203, Table II)

Press Enter to see the answer of $4,102.

$1,987 ($25,000 2.1911 = $11,410; $11,410 5.7435, Table I), or

Press Enter to see the answer of $11,410.

Press Enter to see the answer of $1,987.

$3,856 ($12,500 1.2653 = $9,879, Table I), or ($12,500 0.7903 =

Time Value of Money Module

Press Enter to see the answer of $9,879.

Press Enter to see the answer of $3,856.

1st Alternative = $14,641 ($10,000 1.4641, Table 1), or

Press Enter to see the answer of $14,641.

Press Enter to see the answer of $13,728.

$2,499 ($30,000 12.0061, Table III)

Press Enter to see the answer of $2,499.

Time Value of Money Module

14 periods, 7 years ($10,000 $5,051 = 1.9798, Table I), or

Press Enter to see the answer of 14 periods.

($10,000 $5,002 = 1.9992, Table I), or

Business Calculator Keystrokes:

Press Enter to see the answer of 9 periods.

17 periods, 4 years ($10,000 $5,134 = 1.9478, Table I), or

Press Enter to see the answer of 17 periods.

8% ($50,000 $10,414 = 4.8012, Table I), or

Press Enter to see the answer of 4% 2 = 8%.

Time Value of Money Module

20% ($50,000 $7,102 = 7.0403, Table I), or

Press Enter to see the answer of 5% 4 = 20%.

4% ($50,000 $33,778 = 1.4803, Table I), or

Press Enter to see the answer of 4%.

3 periods, 3 years ($20,000 $5,927 = 3.3744, Table III)

Press Enter to see the answer of 3 periods.

5 periods, 2 years ($20,000 $3,409 = 5.8668, Table III)

Press Enter to see the answer of 5 periods.

Time Value of Money Module

4 periods, 1 year ($20,000 $4,640 = 4.3103, Table III)

Press Enter to see the answer of 4 periods.

10% annual rate ($25,000 $4,095 = 6.1050, Table III)

Press Enter to see the answer of 10%.

12% annual rate ($25,000 $5,715 = 4.3745, Table III)

Press Enter to see the answer of 6% 2 = 12%.

8% annual rate ($25,000 $1,864 = 13.4120, Table III)

Press Enter to see the answer of 2% 4 = 8%.

Time Value of Money Module

$228 ($2,410 10.5753, Table IV)

Press Enter to see the answer of $228.

$1,957 ($26,565 13.5777, Table IV)