Description
Complete the following practice exercises from your textbook, Gapenski and Pink (2015), and submit the completed document or Excel file as requested in the assignment.
Explanation & Answer
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9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 4 -- Time Value Analysis
PROBLEM 1
Find the following values for a lump sum:
- The future value of $500 invested at 8 percent for one year
- The future value of $500 invested at 8 percent for five years
- The present value of $500 to be received in one year when the opportunity cost rate is 8 percent
- The present value of $500 to be received in five years when the opportunity cost rate is 8 percent
assuming:
a. Annual compounding
b. Semiannual compounding
c. Quarterly compounding
ANSWER
1)
PV
Interest
Term
$500
8%
1
a)
Annual Compounding
FV
$540.00
b)
Semiannual Compounding:
PV
Compounding per Year
Interest
Periods
FV
$500
2
4%
2
$540.80
c)
Quarterly Compounding:
PV
Compounding per Year
Interest
Periods
FV
$0
4
2%
4
$541.22
2)
PV
Interest
Term
a)
Annual Compounding
FV
b)
$500
8%
5
$734.66
Semiannual Compounding:
PV
Compounding per Year
Interest
Periods
FV
$500
2
4%
10
$740.12
c)
Quarterly Compounding:
PV
Compounding per Year
Interest
Periods
FV
$500
4
2%
20
$742.97
3)
FV
Interest
Term
$500
8%
1
a)
Annual Compounding
PV
$462.96
b)
Semiannual Compounding:
FV
Compounding per Year
Interest
Periods
PV
$500
2
4%
2
$462.28
c)
Quarterly Compounding:
FV
Com...