miig he should keep quiet, and do his best to learn some elecirien on to provide

Question

miig he should keep quiet, and do his best to learn some elecirien on to provide payments of quarterly, then payments can be repeated 9. A wealthy engineer is considering an endowment to a university, in orde $5,000, $4,000, $3,000, and $2,000 at the ends of the first, sedquarterly respectively, during a given year. If the interest rate is 12% compounded capitalized equivalent amount must be deposited now, so that the quarterly pay forever? the ends of the first, second, third, and fourth dn what a. $ 13,147 b. $ 29,474 c. $ 92,162 d. $117,900

Explanation / Answer

Select .........Option - d..........as correct answer

Inorder to pay for the given 4 annual payments, we need to have 13147 accumulated as interest at the beginning of every year. i.e ...... 5000 / 1.03 + 3000 / (1.03)2 +3000 / (1.03)3 + 2000 / (1.03)4 = 13147

Effective interest rate ( when interest is compounded quarterly ) = (1.03)4 - 1 = 0.12550881 or 12.55%

Capitalized value = 13147 / 0.1255 = 104757

However the first year income of 13147 should also be deposited to make the payments effective for current year itself.

So total capitalized deposit = 104757 + 13147 = 117,904 ..............approximated to 117900......final answer

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