The one year interest rate.

Question

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Answer 1

Question

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

b.

Summary Introduction

To determine: The two year discount factor.

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

c.

Summary Introduction

To determine: The two year annuity factor.

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

d.

Summary Introduction

To determine: The three year annuity factor.

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

e.

Summary Introduction

To determine: The three year discount factor.

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

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Answer 2

Question

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

b.

Summary Introduction

To determine: The two year discount factor.

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

c.

Summary Introduction

To determine: The two year annuity factor.

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

d.

Summary Introduction

To determine: The three year annuity factor.

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

e.

Summary Introduction

To determine: The three year discount factor.

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

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Answer 3

Question

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

b.

Summary Introduction

To determine: The two year discount factor.

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

c.

Summary Introduction

To determine: The two year annuity factor.

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

d.

Summary Introduction

To determine: The three year annuity factor.

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

e.

Summary Introduction

To determine: The three year discount factor.

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

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Answer 4

Question

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

b.

Summary Introduction

To determine: The two year discount factor.

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

c.

Summary Introduction

To determine: The two year annuity factor.

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

d.

Summary Introduction

To determine: The three year annuity factor.

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

e.

Summary Introduction

To determine: The three year discount factor.

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

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Answer 5

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

b.

Summary Introduction

To determine: The two year discount factor.

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

c.

Summary Introduction

To determine: The two year annuity factor.

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

d.

Summary Introduction

To determine: The three year annuity factor.

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

e.

Summary Introduction

To determine: The three year discount factor.

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

Answer 6

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

Answer 7

Chapter 2, Problem 21PS

a.

Summary Introduction

To determine: The one year interest rate.

Answer 8

a.

Expert Solution

Answer to Problem 21PS

The one year interest rate is 10.50%.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Determine the one year interest rate

One Year Interest Rate=[(1Discount Factor)−1]=[(10.905)−1]=[1.104972−1]=0.104972 or 10.50%

Therefore the one year interest rate is 10.50%.

Answer 13

b.

Summary Introduction

To determine: The two year discount factor.

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

Answer 14

b.

Summary Introduction

To determine: The two year discount factor.

Answer 15

b.

Expert Solution

Answer to Problem 21PS

The two year discount factor is 0.8190.

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Determine the two year discount factor

Two Year Discount Factor=[1(1+Discount Rate)2]=[1(1+10.50%)2]=[11.221025]=0.818984 or 0.8190

Therefore the two year discount factor is 0.8190.

Answer 20

c.

Summary Introduction

To determine: The two year annuity factor.

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

Answer 21

c.

Summary Introduction

To determine: The two year annuity factor.

Answer 22

c.

Expert Solution

Answer to Problem 21PS

The two year annuity factor is 1.7240.

Answer 23

c.

Expert Solution

Answer 24

c.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Determine the two year annuity factor

Two Year Annuity Factor=[Discount FactorYear 1+Discount FactorYear 2]=[0.905+0.818984]=1.723984 or 1.7240

Therefore the two year annuity factor is 1.7240.

Answer 27

d.

Summary Introduction

To determine: The three year annuity factor.

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

Answer 28

d.

Summary Introduction

To determine: The three year annuity factor.

Answer 29

d.

Expert Solution

Answer to Problem 21PS

The three year annuity factor is 2.4650.

Answer 30

d.

Expert Solution

Answer 31

d.

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Determine the three year annuity factor

Three Year Annuity Factor=[PVYear 3PVActual]=[$24.65$10]=2.4650

Therefore the three year annuity factor is 2.4650.

Answer 34

e.

Summary Introduction

To determine: The three year discount factor.

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

Answer 35

e.

Summary Introduction

To determine: The three year discount factor.

Answer 36

e.

Expert Solution

Answer to Problem 21PS

The three year discount factor is 0.7410.

Answer 37

e.

Expert Solution

Answer 38

e.

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Determine the three year discount factor

Three Year Discount Factor=[Discount FactorYear 2−Discount FactorYear 3]=[2.4650−1.7240]=0.741016 or 0.7410

Therefore the three year discount factor is 0.7410.

Answer 41

Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQ Ch. 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. 5SQ Ch. 2 - Prob. 6SQ Ch. 2 - Prob. 7SQ Ch. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Opportunity cost of capital Explain why we refer...

The one year interest rate.

To determine: The one year interest rate.

Answer to Problem 21PS

Explanation of Solution

To determine: The two year discount factor.

Answer to Problem 21PS

Explanation of Solution

To determine: The two year annuity factor.

Answer to Problem 21PS

Explanation of Solution

To determine: The three year annuity factor.

Answer to Problem 21PS

Explanation of Solution

To determine: The three year discount factor.

Answer to Problem 21PS

Explanation of Solution

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Chapter 2 Solutions