BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Solutions

Chapter
Section
BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

You are the finance manager for Olympia Industries. The company plans to purchase $1,000,000 in new assembly line machinery in 5 years.

a. How much must be set aside now at interest compounded semiannually to accumulate the $1,000,000 in 5 years?

b. If the inflation rate on this type of equipment is 4% per year, what will be the cost of the equipment in 5 years, adjusted for inflation?

c. Use the inflation-adjusted cost of the equipment to calculate how much must be set aside now.

d. Use the present value formula to calculate how much would be required now if you found a bank that offered 6% interest compounded daily.

(a)

To determine

To calculate: The present value (principal) for an investment with compound amount $1,000,000 is made for 5 years at 6% interest compounded semiannually. Also, round your answer to the nearest cent.

Explanation

Given information:

An investment with compound amount $1,000,000 is made for 5 years at 6% interest compounded semiannually.

Formula used:

Compounding period can be calculated by the formula given below:

Compounding periods=Term of investments(years)×m

Here, m is the period per year.

The interest rate per period can be calculated by dividing the annual, or nominal, rate by the number of periods per year,

Interest rate per period=Nominal ratePeriod per year

The present value (principal) can be calculated by the formula given below:

Principal=Table factor×Compound amount

In table 11-2, the table factor is the intersection of the rate-per-period column and the number-of-periods row is the present value of $1 at compound interest.

Calculation:

Consider the compound amount $1,000,000 is made for 5 years at 6% interest compounded semiannually and solve as shown below:

Since, the variables- compound amount, time period (years), nominal rate and interest compounded are given; therefore, the compounding period can be calculated as below:

Compounding&

(b)

To determine

To calculate: The compound amount for an investment with the principal $1,000,000 is made for 5 years at 4% interest compounded annually. Also, round your answer to the nearest cent.

(c)

To determine

To calculate: The present value (principal) for an investment with compound amount $1,216,650 is made for 5 years at 6% interest compounded semiannually. Use the inflation-adjusted cost of the equipment as the compound amount. Also, round your answer to the nearest cent.

(d)

To determine

To calculate: The present value (principal) for an investment with compound amount $1,000,000 is made for 5 years at 6% interest compounded daily. Also, round your answer to the nearest cent.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 11 Solutions

Show all chapter solutions add
Sect-11.I P-6RESect-11.I P-7RESect-11.I P-8RESect-11.I P-9RESect-11.I P-10RESect-11.I P-11RESect-11.I P-12RESect-11.I P-13RESect-11.I P-14RESect-11.I P-15RESect-11.I P-16RESect-11.I P-17RESect-11.I P-18RESect-11.I P-19RESect-11.I P-20RESect-11.I P-21RESect-11.I P-22RESect-11.I P-23RESect-11.I P-24RESect-11.I P-25RESect-11.I P-26RESect-11.I P-27RESect-11.I P-28RESect-11.I P-29RESect-11.I P-30RESect-11.I P-31RESect-11.I P-32RESect-11.I P-33RESect-11.I P-34RESect-11.I P-35RESect-11.I P-36RESect-11.I P-37RESect-11.I P-38RESect-11.I P-39RESect-11.I P-40RESect-11.II P-6TIESect-11.II P-7TIESect-11.II P-8TIESect-11.II P-1RESect-11.II P-2RESect-11.II P-3RESect-11.II P-4RESect-11.II P-5RESect-11.II P-6RESect-11.II P-7RESect-11.II P-8RESect-11.II P-9RESect-11.II P-10RESect-11.II P-11RESect-11.II P-12RESect-11.II P-13RESect-11.II P-14RESect-11.II P-15RESect-11.II P-16RESect-11.II P-17RESect-11.II P-18RESect-11.II P-19RESect-11.II P-20RESect-11.II P-21RESect-11.II P-22RESect-11.II P-23RESect-11.II P-24RESect-11.II P-25RESect-11.II P-26RESect-11.II P-27RESect-11.II P-28RESect-11.II P-29RECh-11 P-1CRCh-11 P-2CRCh-11 P-3CRCh-11 P-4CRCh-11 P-5CRCh-11 P-6CRCh-11 P-7CRCh-11 P-8CRCh-11 P-9CRCh-11 P-10CRCh-11 P-11CRCh-11 P-12CRCh-11 P-13CRCh-11 P-14CRCh-11 P-1ATCh-11 P-2ATCh-11 P-3ATCh-11 P-4ATCh-11 P-5ATCh-11 P-6ATCh-11 P-7ATCh-11 P-8ATCh-11 P-9ATCh-11 P-10ATCh-11 P-11ATCh-11 P-12ATCh-11 P-13ATCh-11 P-14ATCh-11 P-15ATCh-11 P-16ATCh-11 P-17ATCh-11 P-18ATCh-11 P-19ATCh-11 P-20ATCh-11 P-21ATCh-11 P-22ATCh-11 P-23ATCh-11 P-24ATCh-11 P-25ATCh-11 P-26ATCh-11 P-27ATCh-11 P-28ATCh-11 P-29ATCh-11 P-30ATCh-11 P-31ATCh-11 P-32ATCh-11 P-33ATCh-11 P-34ATCh-11 P-35ATCh-11 P-36ATCh-11 P-37ATCh-11 P-38ATCh-11 P-39AT

Additional Math Solutions

Find more solutions based on key concepts

Show solutions add

For the following set of stores, find the value of each expression: a. X b. (X) c. (X 3) d. (X 3) X 4 5 2 1 3

Essentials of Statistics for The Behavioral Sciences (MindTap Course List)

In Exercises 516, evaluate the given quantity. log416

Finite Mathematics and Applied Calculus (MindTap Course List)

Let f(x) = 3x2 + 5x 2. Find: a. f(2) b. f(a + 2) c. f(2a) d. f(a + h)

Applied Calculus for the Managerial, Life, and Social Sciences: A Brief Approach

Find two vectors in opposite directions that are orthogonal to the vector u. u=3,1,2

Calculus: Early Transcendental Functions (MindTap Course List)

The y-coordinate of the center of mass of the region bounded by , x = 1, x = 5, y = 0 is: 4

Study Guide for Stewart's Single Variable Calculus: Early Transcendentals, 8th

True or False: converges.

Study Guide for Stewart's Multivariable Calculus, 8th