Healthcare Finance Chapter#9 Answers Essay

1221 Words Oct 6th, 2012 5 Pages
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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