Mini Case Chapter 4
A – G
A.
1.) 0 1 2

0 ? $100

2.) 0 1 2 3 i% 100 100 100 3.) 0 1 2 3

-50 100 75 50

B. 1.) FV=PV + Int = PV + PV(i) FV = 100(1.10)3 = 100(1.331) = $133.10

2.) PV = FV/(1+i) = FV(1/1+i) = 100(1+10)3 = 100(.7513) = 75.13

C. FVn = PV(FVIF i,n)= $2 = $1(FVIF 20,n)= 2.00 = (FVIF 20,n)= 1.728 and 2.0736 = 3.8

D. 1(1 + i) 1(1 + i)2 1(1 + i)3= FV = $1(1 + i)3 = $2 = $1(1 + i)3= $2 (1 + i)3= $2/$1 = 2 = 1 + I = (2)1/3= 1 + i = 1.2599 =i= 25.99%.

E.
1.) This is an ordinary annuity--it has its payments at the end of each period. Annuity due has its first payment today. An ordinary annuity has end-of-period payments, while an annuity due has beginning-of-period payments.
2.) 0 1 2 3

100 100 100

F. 1.) FVAn = $100(1) + $100(1.10) + $100(1.10)2= $100[1 + (1.10) + (1.10)2] = $100(3.3100) = $331.00 2.) PVA i,n =( PMT) * (PVIFA i,n ) = PVA 10%,3 =( 100) * (PVIFA 10%,3) = PVA 10%,3 =( 100)* 2.4869 = PVA 10%,3= 248.69
3.) FVAn(Annuity Due) = FVAn(1 + i) = FVA3(Annuity Due) = $331.00(1.10)1 = $364.10
PVAn(Annuity Due) = PVAn(1 + i) = PMT(PVIFAi,n)(1 + i) = PVA3(Annuity Due) = 248.69(1.10)1 = $273.56
G.

A B C D E
1 0 1 2 3 4
2 100 300 300 -50
3 $530.09
The Excel formula in cell A3 is = NPV(10%,B2:E2), with a result of 530.09.