# answer the following questions about finance

*label*Business Finance

*timer*Asked: Feb 3rd, 2019

*account_balance_wallet*$10

### Question Description

Chapter 9: P6, P9, P10, P11, P12, P13, P15

Problems

**6.** Determine the present values if $5,000 is received in the future (i.e., at the end of each indicated time period) in each of the following situations:

- 5 percent for ten years
- 7 percent for seven years
- 9 percent for four years

**9** Assume you are planning to invest $5,000 each year for six years and will earn 10 percent per year. Determine the future value of this annuity if your first $5,000 is invested at the end of the first year

**10** Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent.

**11** What is the present value of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for ten years?

**12** Determine the annual payment on a $500,000, 12 percent business loan from a commercial bank that is to be amortized over a five-year period.

**13** Determine the annual payment on a $15,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also prepare a loan amortization schedule for this loan

**15** Assume a bank loan requires an interest payment of $85 per year and a principal payment of $1,000 at the end of the loan's eight-year life.

- At what amount could this loan be sold for to another bank if loans of similar quality carried an 8.5 percent interest rate? That is, what would be the present value of this loan?
- Now, if interest rates on other similar-quality loans are 10 percent, what would be the present value of this loan?
- What would be the present value of the loan if the interest rate is 8 percent on similar-quality loans?

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## Tutor Answer

Name Professor Class Date Answers to Finance Questions P6. Determining the PV factor using N = Number of years, I = interest rate 6139 Multiply the PVF with the Principal = = $3,070 6227 Multiply the PVF with the Principal = 0.6227 x 5,000 =$3,114 = 0.7084 =0.7084 x 5,000 = $3,542 P9. Determine the future value (FV) using the formula In this case, N=6 =$38,578 P10. Determining the present value using the formula =2,885+2,774 =$5,659 P11. Determining present value of the loan using the formula: Where A.P is the annual payment N=6, i=10%=0.1 = $2,178 N=10, i=10%=0.1 =500 x 6.145 = $3,072 If the annual payment was made for 10 years as in the second case, the present value would increase to $3,072 compared to $2,178 which is the present value when the annual payment was made for 6 years. P12. Determining the annual payment using =$138,705 P13. Determining the annual payment and preparing an amortization schedule for the loan. = $4,732 Year ...

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