Customer Support v Kieso, Intermediate Accounting, 1Ge tice Gradebook ORION Down

Question

Customer Support v Kieso, Intermediate Accounting, 1Ge tice Gradebook ORION Downloadable eTextbook ment e: 05:5a PM/ Remaining 11 mn Exercise 139 Linda Ogleby wants to accumulate $40,000 to use for an around the world trip. She plans to accumulate the desired amount by depesting $5.500 annusl- year-ens pyj compounded annually. (Use the below table.) (Round factor values to 5 decimal into an account at the National final ansavers to 2 decimal places, e.g 458, S8I.5a) FUTURE VALUE OF AN ORDINARY ANNUITY OF 1 100000 03000 210 4310135370 100000 2.02500 205000 3.06040 4.12101 .15252 37402 .30914 .24046315250 5-41632 30812 38774 6.80191 54911 12.5778 46841 97532 .54743 8 73612 8 58297 9 75463 10 15911 11.4033 10 58280 12.00611 11 49132 13 1807 1.20336 12.80760 12 16872 12 48347 13.41209 3.7955514. 15.14044 0.51835 17.95193 12 16 62884 16 29191 16 66214 2101507 15 97304 17 29042 18 59891 20 15668 25 872 1e 633 20 0120 21 41201 0.86473 21.76159 23 097 25 84037 24 2973 54401107 504541 670372 29 77808 Control an

Explanation / Answer

Using future value of annuity formula , we can calculate the no.of years required to accumulate the sum of $40000. Future value of annuity = P*{[(1+r)^n -1]/r} Future value of annuity = $40000 P = Periodic Payments i.e.yearly deposits = $5500 r = rate of interest per year = 4% n = number of years = ? 40000 = 5500*{[(1+0.04)^n -1]/0.04} n = 6.51 Number of years required to accumulate the required sum = 6.51 years

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