OrdinaryAnnuity Ordinary Annuity 7periods 5.2064 8.92280 8periods 5.7466 10.6366
ID: 2433518 • Letter: O
Question
OrdinaryAnnuity Ordinary Annuity
7periods 5.2064 8.92280
8periods 5.7466 10.63663
9periods 6.2469 12.48756
1. What will be the balance on September 1, 2010 in a fund whichis accumulated by making $24,000 annual deposits each September 1beginning in 2003, with the last deposit being made on September 1,2010? The fund pays interest at 8% compoundedannually.
a. $255,279
b. $214,148
c. $181,440
2. What amount should be recorded as the cost of a machinepurchased December 31, 2006, which is to be financed by making 8annual payments of $8,000 each beginning December 31,2007? The applicable interest rate is 8%.
a. $56,000
b. $49,975
c. $85,093
d. $45,973
Explanation / Answer
[OR]
[OR]
FVt = C *[(1+r)t -1] / r Future Value = $24,000 * Future Value ofOrdinary Annuity Factor at 7 periods Future Value= $24,000 * 8.92280 Future Value =$214,147.2[OR]
Calculating Future Value of Ordianary Annuity(FV): (UsingMs-Excel "FV" Function): InterestRate (Rate) 8% Number ofPeriods (Nper) 7 AnnualDeposit Amount (PMT) -24,000 Future Value of Deposit Amount(FV) $214,147.28 PV = C * {1 - [1/(1+r)t]} /r Present Value of Machine Cost = AnnualPayments * Present Value of Ordinary Annuity Factor at 8periods Present Value of Machine Cost = AnnualPayments * Present Value of Ordinary Annuity Factor at 8periods PresentValue of Machine Cost = $8,000 * 5.7466 Present Value of Machine Cost =$45,973[OR]
Calculating Present Value of Machine Cost(PV): (UsingMs-Excel "PV" Function): InterestRate (Rate) 8% Number ofPeriods (Nper) 8 AnnualPayments Amount (PMT) -8,000 Present Value of Machine cost(PV) $45,973.11Related Questions
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