Chapter 5, Solutions Cornett, Adair, and Nofsinger

Using equation 5-1, $1.5 million will accumulate for 15 more years at 5% interest for a future value:

Now, rewrite equation 5-9 in terms of N:

4&5-5 Present Value and Annuity Payments A local furniture store is advertising a deal in which you buy a $3,000 dining room set and do not need to pay for two years (no interest cost is incurred). How much money would you have to deposit now in a savings account earning 5 percent APR, compounded monthly, to pay the $3,000 bill in two years? Alternatively, how much would you have to deposit in the savings account each month to be able to pay the bill?

Use equation 5-1 and solve for the lump sum payment:

Use equation 5-2 and solve for the annuity payment:

4&5-6 Present Value and Annuity Payments A local furniture store is advertising a deal in which you buy a $5,000 living room set with 3 years before you need to make any payments (no interest cost is incurred). How much money would you have to deposit now in a savings account earning 4 percent APR, compounded monthly, to pay the $5,000 bill in three years? Alternatively, how much would you have to deposit in the savings account each month to be able to pay the bill?

Use equation 5-1 and solve for the lump sum payment:

Use equation 5-2 and solve for the annuity payment: