4-45 LG 6: Loan Payment: n%,iPVIFAPVAPMT=

Loan
A PMT = $12,000 (PVIFA8%,3)
PMT = $12,000 2.577
PMT = $4,656.58
Calculator solution: $4,656.40
B PMT = $60,000 (PVIFA12%,10)
PMT = $60,000 5.650
PMT = $10,619.47
Calculator solution: $10,619.05
C PMT = $75,000 (PVIFA10%,30)
PMT = $75,000 9.427
PMT = $7,955.87
Calculator Solution: $7,955.94
D PMT = $4,000 (PVIFA15%,5)
PMT = $4,000 3.352
PMT = $1,193.32
Calculator solution: $1,193.26
4-46 LG 6: Loan Amortization Schedule
a. PMT = $15,000 (PVIFA14%,3)
PMT = $15,000 2.322
PMT = $6,459.95
Calculator solution: $6,460.97 Chapter 4 Time Value of Money Find out more at
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b. End of Loan Beginning of Payments End of Year
Year Payment Year Principal Interest Principal Principal
1 $ 6,459.95 $15,000.00 $2,100.00 $4,359.95 $10,640.05
2 $ 6,459.95 10,640.05 1,489.61 4,970.34 5,669.71
3 $ 6,459.95 5,669.71 793.76 5,666.19 0
(The difference in the last year's beginning and ending principal is due to rounding.)
c. Through annual end-of-the-year payments, the principal balance of the loan is declining, causing
less interest to be accrued on the balance.
4-47 LG 6: Loan Interest Deductions
a. PMT = $10,000 (PVIFA13%,3)
PMT = $10,000 (2.361)
PMT = $4,235.49
Calculator solution: $4,235.22
b. End of Loan Beginning of c. Payments End of Year
Year Payment Year Principal Interest Principal Principal
1 $ 4,235.49 $ 10,000.00 $ 1,300.00 $ 2,935.49 $ 7,064.51
2 4,235.49 7,064.51 918.39 3,317.10 3,747.41
3 4,235.49 3,747.41 487.16 3,748.33 0
(The difference in the last year's beginning and ending principal is due to rounding.)
4-48 LG 6: Monthly Loan Payments
a. PMT = $4,000 (PVIFA1%,24)
PMT = $4,000 (21.243)
PMT = $188.28
Calculator solution: $188.29
b. PMT = $4,000 (PVIFA.75%,24)
PMT = $4,000 (21.889)
PMT = $182.74
Calculator solution: $182.74
4-49 LG 6: Growth Rates
a. PV = FVn x PVIFi%,n b.
Case Case
A PV = FV4 x PVIFk%,4yrs. A Same
$500 = $800 x PVIFk%,4yrs
.625 = PVIFk%,4yrs
12% < k < 13%
Calculator Solution: 12.47%
B PV = FV9 x PVIFi%,9yrs. B Same
$1,500 = $2,280 x PVIFk%,9yrs.
.658 = PVIFk%,9yrs.
4%<k<5%
Calculator solution: 4.76%
C PV = FV6 x PVIFi%,6 C Same Chapter 4 Time Value of Money Find out more at
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 $2,500 = $2,900 x PVIFk%,6 yrs.
.862 = PVIFk%,6yrs.
2% < k < 3%
Calculator solution: 2.50%
c. The growth rate and the interest rate should be equal, since they represent the same thing.