Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE D-1

1. (1) This is a future value of a single amount problem.

   (2) n = 10; i = 8%.

   

   (3) The interest factor from Table 1 is 2.15892.

   (4) Future Value = Principal × FV Factor Future Value = $1,000 × 2.15892 Future Value = $2,158.92

2. (1) This is a future value of a single amount problem.

   (2) n = 10 × 2 = 20; i = 8% ÷ 2 = 4%

   

   (3) The interest factor from Table 1 is 2.19112.

   (4) Future Value = Principal × FV Factor Future Value = $1,000 × 2.19112 Future Value = $2,191.12

3. We would expect the answer to question 2 to be a little larger than the answer to question 1 because the interest is compounded more frequently in question 2 which means there will be a larger amount of accumulated interest by the end of year 10 in this scenario.
4. (1) This is a present value of a single amount problem.

   (2) n = 10; i = 8%

   

   (3) The interest factor from Table 3 is .46319.

   (4) Present Value = Future Amount × PV Factor Present Value = $1,000 × .46319 Present Value = $463.19

5. (1) This is a present value of a single amount problem.

   (2) n = 2 × 10 = 20; i = 8% ÷ 2 = 4%.

   

   (3) The interest factor from ...