Connect 1 Semester Access Card For Managerial Accounting
5th Edition
ISBN: 9781259296284
Author: John J Wild, Ken Shaw Accounting Professor
Publisher: McGraw-Hill Education
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Question
Chapter B, Problem 1QS
To determine
Concept introduction:
Time value of money: Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.
To indicate:
The interest rate column and number of period for each of the given case
Expert Solution & Answer
Answer to Problem 1QS
The interest rate column and number of period for each of the given case are as follows:
| Case # | Rate Column | Number of Periods Row |
| 1 | 2% | 8 |
| 2 | 12% | 2 |
| 3 | 3% | 4 |
| 4 | 1% | 24 |
Explanation of Solution
The interest rate column and number of period for each of the given case are as follows:
| Case # | Annual Rate | Number of Compounding in a year | Rate Column | Number of Periods Row |
| A | B | C = A/B | D = 2*B | |
| 1 | 8% | 4 | 2% | 8 |
| 2 | 12% | 1 | 12% | 2 |
| 3 | 6% | 2 | 3% | 4 |
| 4 | 12% | 12 | 1% | 24 |
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For each of the following cases, indicate (a) to what interest rate columns and (b) to what number of periods you would refer in looking up the future value factor. (Round percentages to 2 decimal places, e.g. 5,275.)(1) In Table 1 (future value of 1):
Annual Rate
Number ofYears Invested
Compounded
Case A
4%
3
Annually
Case B
9%
5
Semiannually
(a)
(b)
Case A
%
periods
Case B
%
periods
(2) In Table 2 (future value of an annuity of 1):
Annual Rate
Number ofYears Invested
Compounded
Case A
6%
5
Annually
Case B
12%
6
Semiannually
(a)
(b)
Case A
%
periods
Case B
%
periods
For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.
1. In a future value of 1 table:
Annual Rate
Number ofYears Invested
Compounded
a. 9%
9
Annually
b. 12%
5
Quarterly
c. 10%
15
Semiannually
2. In a present value of an annuity of 1 table:
Annual Rate
Number ofYears Involved
Number ofRents Involved
Frequency of Rents
a. 9%
25
25
Annually
b. 10%
15
30
Semiannually
c. 12%
7
28
Quarterly
For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table:
Annual Rate
Number of Years Invested
Compounded
(a) Rate of Interest
(b) Number of Periods
a.
11%
10
Annually
%
b.
8%
8
Quarterly
%
c.
10%
19
Semiannually
%
2. In a present value of an annuity of 1 table: (Round answers to 1 decimal place, e.g. 458,58.1.)
Annual Rate
Number of Years Invested
Number of Rents Involved
Frequency of Rents
(a) Rate of Interest
(b) Number of Periods
a.
12%
30
30
Annually
%
b.
11%
16
32
Semiannually
%
c.
12%
8
32
Quarterly
%
Chapter B Solutions
Connect 1 Semester Access Card For Managerial Accounting
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