Using the appropriate interest table, provide the solution to each of the follow

Question

Using the appropriate interest table, 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, com- pounded annually?

(b) Robert Hitchcock is 40 years old today and he wishes to accumulate $500,000 by his sixty-fifth birth- day so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amounby making equal deposits on his fortieth through his sixty-fourth birthdays. What annual deposit must Robert make if the fund will earn 12% 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 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?

Explanation / Answer

a FV= PV ( PVAF, Life, Rate) 90000= X* (PVAF, Rate, Life) 90000= X(1+.08)8 X = 90000/5.74 X = 15661 The payment of each year should be $ 15661 15661 c Fv= PV (1+r)n 47347 = 20000(1+.09)n 1.09)n = 2.36 n = 10 years The life will be 10 Years d 27600= 19553 (1+r) 4 1.41= ( 1+r)4 r =9%

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