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Brief Exercise 5-3 (Algo) Future value; solving for unknown; single amount (L05.4) Bill OBrien would like to take his wife,
TABLE 1 Future Value of $1 FV = $1 (1 + ir ni 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 1 1.01000 1.01500 1
20.0% 0.83333 0.69144 0.57870 0.48225 0.40189 TABLE 2 Present Value of $1 PV - I 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 45% 5.0%
TABLE 3 Future Value of an Ordinary Annuity of $1 FVA - 11+1)-1 nil 1 2 3 4 5 1.0% 1.5% 2.0% 1.0000 1.000 1.0000 2.0100 2.015
TABLE 4 Present Value of an Ordinary Annuity of $1 PVA (1+1 W 1 2 3 4 5 1.0% 1.5% 2.0% 2.5% 0.99010 0.98522 0.98039 0.97561 1
TABLE 5 Future Value of an Annuity Due of $1 FVAD - ((1+01 - 1x11 + II 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 40% 5.0% 5.5% 6.0%
TABLE 6 Present Value of an Annuity Due of $1 PVAD - (14 6 X (1+ I 1.0% 1.00000 2 1.00010 3 2.97040 4 300009 5 4.00197 1.5%
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Answer #1

Present value = $25,500

N = 3 years

Future value = $32,130

FVF(i%, 3 years) = 32,130/25,500

= 1.26

Hence, I = 8% (using future value table)

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