(Various Time Value Situations) Using the appropriate interest table, provide th

Question

(Various Time Value Situations) Using the appropriate interest table, provide the solution to each of EXERCISES SET B PROBLEMS 7 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 amount by 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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