Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 2, Problem 37PS
a.
Summary Introduction
To determine: The duration to take the money to double.
b.
Summary Introduction
To determine: Rule 69.
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The correct formula to calculate the future value (FV) of a present value (PV) when
simple interest is used is? Note: N would be number of periods and i would be
the interest rate.
A. FV = PV X (1+i)^N, where^ represents power
B. FV = PV X (1+i)^-N, where^ represents power
O C. FV = PV/((1+i) X N)
D. FV = PV x (1 + (N x i))
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The correct formula to calculate the future value (FV) of a present value (PV) when
simple interest is used is? Note: N would be number of periods and i would be
the interest rate.
A. FV = PV X (1+i)^N, where^ represents power
OB. FV = PV X (1+i)^-N, where^ represents power
C. FV = PV /((1+i) x N)
D. FV = PV x (1 + (N X i))
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Mark for Review What's This?
Suppose the real rate on your investment is 9.5 percent and the inflation rate is 2.6 percent. What nominal rate would you expect to see on your investment? Use the Fisher Effect Formula.
Example 1. Compound interest
When interest is compounded continuously, the rate of
change of the amount x of the investment is proportional
to the amount present. In this case, the proportionality
constant is the annual interest rate r (as a decimal); that
is, dx/dt = rx.
(a) If $2000 is invested at 8%, compounded
continuously, find an equation for the future value of the
investment as a function of time t, in years.
(b) How long will it take for the investment to double?
(c) What will be the future value of this investment after
35 years?
Chapter 2 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 8SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Discount factors If the PV of 139 is 125, what is...
Ch. 2 - Prob. 3PSCh. 2 - Prob. 4PSCh. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 8PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values A machine costs 380,000 and is...Ch. 2 - Opportunity cost of capital Explain why we refer...Ch. 2 - Present values A factory costs 400,000. It will...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Prob. 19PSCh. 2 - Prob. 20PSCh. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Prob. 24PSCh. 2 - Prob. 25PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 31PSCh. 2 - Prob. 32PSCh. 2 - Prob. 33PSCh. 2 - Prob. 34PSCh. 2 - Prob. 35PSCh. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Prob. 37PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
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