gilileering Economics FPA Fundamentals Homework What is the equivalent value at
ID: 1141980 • Letter: G
Question
gilileering Economics FPA Fundamentals Homework What is the equivalent value at the end of Year 7 of $2000 deposits made now and in 3 years plus a $1000 deposit made at the end of Year 6 with interest at 6%? ($6592) 1. 2. What amount would you accept now if you had to pay back $500 at the end of Year 2 and $600 at the end of Year 5 with interest at 7%? ($864.50) You have $125,000 in a mutual fund that earns 8% per year. amount could you take out each year for the next 20 years to use for house payments if the account is to be depleted at the end of year 20? 3. What ($12,737.50) You are given $150 every year by your grandmother starting on your first birthday. At 5% interest, what amount would you have at your 18th birthday if you deposited each gift in the bank? ($4219.80) 4. After your grandmother gives you your $150 on your 10h birthday, she says that she's moving to Florida and wants to give you a lump sum check that equaled the amount that you would have accrued with the continual annual gift. What amount would you accept at that point to have the same amount totaled were she to continue to give you the money until you were 18? Interest is still at 5%. (S969.26) 5.Explanation / Answer
1) Future value of the cash flow = 2000(F/P, 6%, 7) + 2000(F/P, 6%, 4) + 1000(F/P, 6%, 1)
= 2000*(1 + 6%)^7 + 2000*(1 + 6%)^4 + 1000*(1 + 6%)
= $6592
2) Present value of cash flow = 500(P/F, 7%, 2) + 600(P/F, 7%, 5)
= 500*(1 + 7%)^-2 + 600*(1 + 7%)^-5
= $864.50
3) Annual amount = 125000(A/P, 8%, 20)
= 125000*((0.08*1.08^20)/(1.08^20 – 1)) = $12,731.50
4) Future amount = 150(F/A, 5%, 18)
= 150*(1.05^18 – 1)/0.05 = $4,219.80
(Note: Only four subparts/questions are allowed to be asked/answered)
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