Complete The Following From The Textbook Chapter 9 E1 P2 P3

Complete The Following From The Textbook Chapter 9 E1 P2 P3 P4

Complete the following from the textbook: · Chapter 9: E1, P2, P3, P4, P5, P7, P16, P17, P19 · SEE DETAILED BELOW Chapter 9- E1 . Go to the Federal Reserve website, . Go to “Economic Research and Data,†and access “Consumer Credit.†Find interest rates charged by commercial banks on new automobile loans, personal loans, and credit card plans. Compare the current or recent level of interest rates among the three types of loans. Compare trends in the cost of consumer credit provided by commercial banks over the past three years.

E1. PART II. Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent. What would be the future value if the interest rate is a simple interest rate? What would be the future value if the interest rate is a compound interest rate?

P3. Determine the future values if $5,000 is invested in each of the following situations: 5 percent for ten years, 7 percent for seven years, 9 percent for four years.

P4. You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding. What would be the future value of your investment? Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment's future value in terms of purchasing power? What would be the investment's future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?

P5. Find the present value of $7,000 to be received one year from now, assuming a 3 percent annual discount interest rate. Also calculate the present value if the $7,000 is received after two years.

P7. Determine the present value if $15,000 is to be received at the end of eight years and the discount rate is 9 percent. How would your answer change if you had to wait six years to receive the $15,000?

P16. Use a financial calculator or computer software program to answer the following questions: What would be the future value of $15,555 invested now if it earns interest at 14.5 percent for seven years? What would be the future value of $19,378 invested now if the money remains deposited for eight years and the annual interest rate is 18 percent?

P17. Use a financial calculator or computer software program to answer the following questions: What is the present value of $359,000 that is to be received at the end of 23 years if the discount rate is 11 percent? How would your answer change if (a) the $359,000 is to be received at the end of 20 years?

P19. Use a financial calculator or computer software program to answer the following questions. What would be the future value of $19,378 invested now if the money remains deposited for eight years, the annual interest rate is 18 percent, and interest on the investment is compounded semi-annually? How would your answer for (a) change if quarterly compounding were used?

Paper For Above instruction

The assignment encompasses a comprehensive set of tasks related to financial calculations, including future value (FV), present value (PV), and trends in consumer credit interest rates. The initial directive is to investigate current interest rates for different consumer loans—automobile loans, personal loans, and credit cards—by accessing the Federal Reserve's "Consumer Credit" data via its website. This examination involves comparing the recent levels of these rates and analyzing trends over the past three years, providing insight into the cost dynamics of consumer credit in the banking sector.

The core of the assignment requires performing various financial computations. The first task involves calculating the future value of an investment of $10,000 over five years at an 8% interest rate, contrasting simple interest with compound interest methods. Simple interest calculations are straightforward, based solely on the original principal, while compound interest involves interest-on-interest effects, leading to higher future values over time.

Subsequently, students are asked to determine the future values of $5,000 invested at different rates and durations: 5% for ten years, 7% for seven years, and 9% for four years. These calculations reveal how interest rates and time influence the growth of investments, serving as practical applications of the future value formula.

The next segment considers a $2,500 investment over three years at a 9% nominal interest rate with annual compounding. The future value is computed, then adjusted for inflation expectations of 3% and 9%, respectively, to assess the investment’s purchasing power in the future. This analysis underscores the importance of inflation in real versus nominal returns, illustrating the potential erosion of purchasing power and the need to consider inflation-adjusted outcomes when planning investments.

Another task involves calculating the present value of a future sum, specifically $7,000 to be received in one and two years, assuming a 3% discount rate. These calculations exemplify how to determine the current worth of future cash flows, fundamental for various financial decision-making contexts.

Further, the assignment calls for finding the present value of a sum ($15,000) to be received at the end of multiple periods (eight and six years), with a 9% discount rate. This demonstrates how the timing of future cash flows influences their present value, incorporating the concept of discounting future amounts to today’s dollars.

Using financial calculator software, students are to calculate the future value of different investments—$15,555 over seven years at 14.5%, and $19,378 over eight years at 18%. These exercises emphasize the practical application of financial tools in determining growth projections of investments at specified interest rates and durations.

The subsequent tasks involve computing the present value of a large future sum ($359,000) at 11% over 23 and 20 years. These computations highlight how the length of time affects the present value of future cash flows, essential in long-term investment planning and valuation.

Lastly, the assignment explores the impact of different compounding frequencies—semi-annual and quarterly—on the future value of an $19,378 investment over eight years at 18%. Recognizing how compounding intervals influence the accumulation of interest provides a nuanced understanding of investment growth.

References

  1. Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice (15th ed.). Cengage Learning.
  2. Franklin, G. (2019). Fundamentals of Financial Planning. Wiley.
  3. Investopedia. (2023). Future Value (FV). https://www.investopedia.com/terms/f/futurevalue.asp
  4. The Federal Reserve. (2023). Consumer Credit Data. https://research.stlouisfed.org/fred2/series/CCLACBS
  5. Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Fundamentals of Corporate Finance (12th ed.). McGraw-Hill.
  6. MyFinanceLab. (2022). Financial Calculator Functions. Pearson.
  7. Jordon, B. (2018). Personal Finance Essentials. Wiley.
  8. Khan, M. Y. (2017). Financial Markets and Institutions. McGraw-Hill Education.
  9. Yale University. (2020). Financial Planning and Investment Strategies. OpenCourseWare.
  10. Investopedia. (2023). Present Value (PV). https://www.investopedia.com/terms/p/presentvalue.asp

References

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