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Can someone explain when to use these formulas. Like what specific situation. (Future Value) FV = S * (1 + r ) ^ n (Present

Can someone explain when to use these formulas. Like what specific situation.

(Future Value) FV = S * (1 + r ) ^ n

(Present Value) PV = S * [1/(1 + r)^n]

(Future Value Annuity) FV = A * [(1+r)^n) ? 1]/r

(Present Value Annuity) PV = PV = A * [ 1- 1/ (1+ r ) ^ n ] / r

Can someone also explain the answers to these problems. Only Exercises 3.1 and 3.2 are needed. The pictures are the questions and the pdf shows the solutions.

image text in transcribed Solutions Chapter 3 Exercise 3.1 a. PV of withdrawals = $4,000*(1 - 1/1.066 )/0.06 = $19,669.30. FV = ($20,000 - $19,669.30)*1.066 = $469.11. b. PV at end year 2 of withdrawals = $4,000*(1 - 1/1.066 )/0.06 = $19,669.30. PV today = $19,669.30/1.062 = $17,505.61. FV = ($20,000 - $17,505.61)*1.068 = $3,975.68. Or $20,000*1.062 = $22,472 = FV one year before first withdrawal. ($22,472 - $19,669.30)*1.066 = $3,975.68. Exercise 3.2 PV of 20 withdrawals = $12,000*(1 - 1/1.0620 )/0.06 = $137,639.05. This is the amount the fund must hold one year before the first withdrawal. Using [4] we set the FV of the 15 deposits equal to this amount. D*{(1.06)15 - 1}/0.06 = $137,639.05. D = $137,639.05/23.276 = $5,913.35. Exercise 3.3 a. $25*(1.015)5 = $26.932m. b. PV = $26.932/(0.06 - 0.015) = $598.49m.

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