Answer: Chapter 3

EQUIVALENCE

A Factor Approach

3-1

If you had $1,000 now and invested it at 6%, how much would it be worth 12 years from now?

Solution

F = 1,000(F/P, 6%, 12) = $2,012.00

3-2

Mr. Ray deposited $200,000 in the Old and Third National Bank. If the bank pays 8% interest,  

how much will he have in the account at the end of 10 years?

Solution

F = 200,000(F/P, 8%, 10) = $431,800

3-3

If you can earn 6% interest on your money, how much is $1,000 paid to you 12 years in the FUTURE  

worth to you now?

Solution

P = 1,000(P/F, 6%, 12) = $497.00

3-4

Determine the value of P USING the appropriate factor.

Solution

P = F(P/F, 6%, 5) = $500(0.7473) = $373.65

3-5

Downtown is experiencing an explosive population growth of 10% per year. At the end of 2005  

F = $500

i = 6%

P

0 1 2 3 4 550 Chapter 3 Equivalence – A Factor Approach

the population was 16,000. If the growth rate continues unabated, at the end of how many years  

will it take for the population to triple?

Solution

Use i = 10% to represent the growth rate.

48,000 = 16,000(F/P, 10%, N)

(F/P, 10%, n) = 48,000/16,000

= 3.000