Answers:

II.

P =16,792.1291

F = 43,553.4583

A = 2,723.8417

III.

b. 9,611.0711

c. 8,266.7364

II. (20pts) Consider the end-of-year geometric sequence of cish flows. The rate of increase is 10% per year after the first, and the interest rates 15% per year. P-present value, A-equivalent equal end-of-year cash flow which starts at year 1 until year 10 and F-future value of cash flows Determine the P, A, and F equivalent values. 500(1.10) 1500(1.10) 1500(1.10)7 1500(1.10) 1500(1.10) 1500(1.10) 1500(1.10) 1500(1.10) 1500(1.10) 1500 10 III. (15 pts) It is December of the year 2000. Mrs. Rogers is planning to invest a large amount of money in an investment scheme (1-10%) that should be enough to cover the college education of each of her three children. Mrs. Rogers is planning to enroll her children in De La Salle University, under the engineering program, where tuition fees are currently at $1000, and steadily rising at S50 per year. The engineering program is a 5-year program, and she expects that all her children will graduate on time. Emily, the eldest, will start in 2006. Jess, the middle child, will start in 2007. Lee will start in 2010. a. Draw the cash flow diagram for Mrs. Roger's investment scheme. (4 pts) b. What is the amount that Mrs. Rogers will have to invest in year 2000? (6 pts) c. If Emily is able to start working as soon as she graduates, and is willing to contribute $1000 to her siblings' education each year, how much does Mrs. Rogers now have to invest irn year 2000? (5 pts)