Healthcare Finance Chapter#9 Answers Essay

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Financial Condition Analysis, Chapter 9 Problems: P 9.1-9.4, 9.8 & 9.11 HM 707 Health Management Foundations II Problem 9.1 Find the following values for a lump sum assuming annual compounding: a) The future value of $500 invested at 8 percent for one year: FVN = FV1= PV × (1 +I)N = $500 x (1 + 0.08) = $500 x 1.08 = $540 b) The future value of $500 invested at 8 percent for five years: FVN = FV5= PV × (1 +I)N = $500 x (1 + 0.08)5 = $500 x (1.08)5 = $734.66 c) The present value of $500 to be received in one year when the opportunity cost rate is 8 percent (discounting): PV = FVN = $5001 = $500 = $462.96 (1 + I)N (1 + 0.08)1 (1.08)1 d) The present value of $500 to be received in…show more content…
Effective annual rate (EAR) = (1 + Periodic rate)M - 1.0 = (1 + 0.08/4)4- 1.0 = (1.02)4- 1.0 = 0.0824 = 8.24% Therefore the annual interest rate is 8% and the effective annual rate compounded quarterly is 8.24% Problem 9.4 Find the following values

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