Using the appropriate interest table or Excel
formula, provide the solution to each of the following four questions by
computing the unknowns.
P6-2 (Various Time Value
Situations) Using the appropriate interest table or Excel
formula, provide the solution to each of the following four questions by
computing the unknowns.
(a) What
is the amount of the payments that Ned Winslow must make at the end of each of 8
years to accumulate a fund of $90,000 by the end of the eighth year, if the
fund earns 8% interest, compounded annually?
(b)
Robert Hitchcock is 40 years old today and he wishes to accumulate $500,000 by
his 65 th birthday so he can retire to his summer place on Lake Hopatcong. He
wishes to accumulate this amount by making equal deposits on his fortieth
through sixty-fourth birthdays. What annual deposit must Robert make if the
fund will earn12% interest compounded annually?
(c) Diane
Ross has $20,000 to invest today at 9% to pay a debt of $47,347 How many years
will it take her to accumulate enough to liquidate the debt?
(d) Cindy Houston has a $27,600 debt that she wishes to
repay in 4 years from today; she has $19,553 that she intends to invest for the
4 years. What rate of interest will she need to earn annually in order to
accumulate enough to pay the debt?
TUTORIAL PREVIEW
(a) What
is the amount of the payments that Ned Winslow must make at the end of each of 8
years to accumulate a fund of $90,000 by the end of the eighth year, if the
fund earns 8% interest, compounded annually?
The payment that must
be made to accumulate $90,000 over 8 periods at 8% interest is:
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$8,461.33
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